Japan’s Nikkei 225 index fell by approximately 1.3%, dropping below the 63,300 level during Wednesday’s (November 4) trading session, following the market's reopening after a holiday. The downward pressure stemmed primarily from technology stocks and companies linked to artificial intelligence (AI), as investors began to question the sustainability of the massive investment trend within the sector.
Market sentiment in Japan also tracked the weakness seen in U.S. stock futures. This movement comes amid political uncertainty in the U.S., where preliminary election results have heightened investor focus on potential shifts in the composition of Congress and the subsequent impact on policies affecting the technology sector.
Market participants are closely monitoring the possibility of increased regulation within the AI industry, as well as heightened scrutiny of technology firms, should the policy direction in Washington shift. Given the significant exposure of several Japanese companies to the global expansion of AI, the Japanese stock market remains highly sensitive to changes in sentiment within the tech sector.
Technology stocks served as the primary drag on the Nikkei. Kioxia Holdings plunged 6.7%, Advantest fell 4.2%, Tokyo Electron weakened by 3.3%, and Lasertec saw a correction of 3%. Taiyo Yuden faced even sharper pressure, declining by approximately 9.6%.
In the near term, the Nikkei is expected to remain sensitive to global sentiment regarding technology stocks and developments in U.S. policy toward the AI industry. Concerns surrounding high valuations—coupled with questions about whether AI investments will ultimately yield profits—are likely to sustain high levels of volatility for Japanese semiconductor and technology stocks.