TOKYO - Japan's Nikkei 225 Stock Average plunged 1,369.36 points, or 2.12%, to close at 63,290.11 at 3:30 p.m. on Friday, October 30, ending a three-day winning streak as a sharp selloff in semiconductor and artificial intelligence-related shares swept through the Tokyo market, while the Bank of Japan's decision to leave interest rates unchanged failed to restore investor confidence.
The benchmark index suffered its first decline in four trading sessions, reversing much of the recovery seen earlier in the week. The Nikkei opened at 64,344.37, briefly climbed to 64,589.04, and subsequently fell as low as 62,711.42 before recovering part of its losses in afternoon trading.
The broader Topix index also declined, finishing at 3,965.07, down 38.21 points, or 0.95%, reflecting weakness across a wide range of sectors, although some consumer, entertainment and transportation shares advanced.
Selling pressure followed a downturn on Wall Street on October 29, when investors reassessed the high valuations of technology companies and questioned how quickly massive investments in artificial intelligence infrastructure would translate into earnings. The technology-heavy Nasdaq Composite fell 1.38%, while the Dow Jones Industrial Average lost approximately 132 points.
The weakness spread to Japan's semiconductor equipment manufacturers, electronic component suppliers and other companies closely linked to the global AI investment boom. Concerns about spending by major U.S. technology companies weighed heavily on shares that had previously benefited from expectations of sustained demand for advanced chips and data center equipment.
Ibiden, a manufacturer of semiconductor package substrates, fell by the daily limit of 1,500 yen, or 15.21%, to 8,359 yen, while semiconductor testing equipment maker Lasertec dropped 8.81% to 37,700 yen. Fujitsu also suffered heavy selling, with its shares declining 16.20% to 3,622 yen.
The sharp movements highlighted the Japanese market's increasing sensitivity to developments in the U.S. technology sector. Semiconductor and AI-related companies have become important drivers of the Nikkei's performance, leaving the benchmark particularly vulnerable when investors reduce their exposure to high-growth technology stocks.
Despite the overall market decline, several companies recorded substantial gains following corporate earnings announcements and changes in investor expectations. Konami Group surged 15.02% to 26,385 yen, while Oriental Land, operator of Tokyo Disneyland and Tokyo DisneySea, rose 8.45% to 3,438 yen. ANA Holdings advanced 6.31% to 3,043 yen.
Trading remained active as investors adjusted their positions ahead of the three-day weekend in Japan. Turnover on the Tokyo Stock Exchange's Prime Market reached approximately 8.47 trillion yen, with about 2.50 billion shares changing hands.
The Bank of Japan kept its benchmark short-term interest rate at 1.25% following its two-day policy meeting, voting eight to one in favor of maintaining the current level. Board member Hajime Takata opposed the decision and called for an increase to 1.5%, highlighting growing differences among policymakers over how quickly monetary tightening should proceed.
The central bank raised its inflation outlook and warned that price pressures could exceed expectations, signaling that further interest rate increases remain possible. The decision reflected the BOJ's assessment that underlying inflation has moved closer to its 2% target, although uncertainties surrounding global economic growth, wages and consumer spending continue to complicate the outlook.
Governor Kazuo Ueda said at a news conference that underlying inflation had not yet reached a point where the 2% target could be considered sustainably and stably achieved. He emphasized the importance of examining incoming economic indicators and underlying price trends before deciding the timing and pace of further interest rate increases.
The BOJ also decided unanimously to accelerate the pace of sales of exchange-traded funds accumulated during its years of monetary easing, marking another step toward reducing its extensive financial market interventions.
Currency markets remained sensitive to the monetary policy outlook, with the dollar trading around 157.61 yen at 3 p.m. in Tokyo, compared with approximately 157.71 yen in New York the previous day. The yen strengthened briefly following the BOJ's announcement before the dollar recovered some ground.
A stronger yen can reduce the value of overseas earnings reported by Japanese exporters, particularly automobile manufacturers and electronics companies. Conversely, it can help ease imported inflation by lowering the yen-denominated cost of energy, food and raw materials.
Fresh economic figures released on October 30 offered a mixed picture of Japan's economy. Tokyo's core consumer price index, excluding fresh food, rose 2.6% in October from a year earlier, slowing from 2.7% in September but remaining above the BOJ's inflation target. The reading matched market expectations and reinforced concerns that households continue to face significant price pressures.
Employment data indicated that labor market conditions remained relatively stable. Japan's unemployment rate fell to 2.4% in September from 2.5% in August, while the ratio of job openings to applicants increased to 1.19 from 1.18, indicating that employers continued to compete for workers despite slowing economic activity in some industries.
Industrial production provided a more encouraging signal, rising 2.2% in September from the previous month, according to preliminary government figures. The increase followed a 2.4% decline in August and exceeded market expectations for a recovery of around 1.2% to 1.3%. Output was also 1.9% higher than a year earlier.
The improvement suggested that manufacturing activity was recovering after a period of weakness, although uncertainty surrounding international trade, demand for electronics and the outlook for the global economy remained important risks for Japanese producers.
Consumer spending figures were less encouraging. Retail sales increased 2.3% in September from a year earlier, below market expectations of approximately 3.3%. The result suggested that consumption continued to face pressure from rising living costs, even as employment remained firm and wage increases supported household incomes.
Department store and supermarket sales rose 1.7% from a year earlier, providing evidence of continued consumer spending in some retail categories. However, higher prices rather than stronger sales volumes may have accounted for part of the increase.
The combination of persistent inflation, improving industrial output and relatively stable employment has created a difficult policy environment for the BOJ. While the economy has shown sufficient resilience to support gradual monetary normalization, households remain sensitive to rising prices, and businesses face uncertainty over financing costs and overseas demand.
The October 30 session also came during a major corporate earnings reporting period, with companies including Tokyo Electron, Kioxia Holdings, Murata Manufacturing, Mitsubishi Electric, Panasonic Holdings, TDK, Daiichi Sankyo, East Japan Railway and Lasertec scheduled to release financial results.
Investors are paying particular attention to semiconductor manufacturers and equipment suppliers, whose earnings provide an indication of whether global spending on artificial intelligence infrastructure can continue supporting Japan's technology industry. Corporate forecasts for the coming months are expected to play a major role in determining whether the recent market correction develops into a more prolonged downturn.
The Nikkei ended October substantially below its closing level of 68,956.72 on October 1, reflecting a difficult month for Japanese equities despite several periods of recovery. The benchmark also remained well below its June record, underscoring the scale of the market's retreat from earlier highs.
With the Tokyo market closed for the weekend and the November 3 Culture Day holiday approaching, investors will turn their attention to corporate earnings, movements in U.S. technology shares and indications of when the BOJ could next increase interest rates.
For Japan's economy, the central question remains whether improving industrial activity and steady employment can sustain growth while borrowing costs rise and consumers continue to face elevated prices. The sharp decline in stocks on October 30 demonstrated how closely Japan's financial markets remain tied to global technology investment, international monetary policy and expectations for the country's economic recovery.
