Nikkei falls 1.3% as electronics stocks lead Tokyo selloff

The Nikkei Stock Average fell 1.3% to 65,464.44 in early Tokyo trading, led by electronics shares that gave back part of Wednesday's AI-driven surge.

The pullback followed a rare coordinated yen-buying intervention by Japan and the United States that strengthened the currency, eroding the weak-yen tailwind that had lifted exporters. The Ministry of Finance confirmed the joint action and said authorities would not hesitate to take further steps.

Tokyo Electron Ltd. dropped 4.7% and Murata Manufacturing Co. fell 4.2%, the biggest drags on the benchmark. The dollar traded at 157.68 yen, little changed from 157.70 at Wednesday's Tokyo close. Investors were watching NTT Inc., scheduled to report quarterly results later Thursday, while developments in the Middle East remained in focus.

The reversal shows how quickly the weak-yen trade can unwind. A firmer currency cuts the yen value of overseas earnings for automakers, electronics makers and other exporters, while the Bank of Japan's path toward further rate increases keeps two-year JGB yields near their highest since 1995.

Wednesday's session had seen the benchmark surge on a broad rally in semiconductor and artificial-intelligence shares, fueled by strong U.S. technology earnings and a recovery among South Korean chipmakers. Thursday's early trade reversed that move, with chip-equipment and electronic-component names leading the declines as investors locked in gains.

The yen's strength is the central cross-current. After the coordinated intervention pushed the dollar from about 160 yen to the 157 range, traders are weighing whether the currency can hold its gains or slide back toward 160, a move that would test the credibility of the joint action and could revive expectations for another BOJ rate increase. The two-year JGB yield has climbed to its highest since 1995 as markets price in earlier tightening.

For exporters, the calculus has shifted. A weaker yen had boosted the value of overseas revenue when converted into yen, a key support for Toyota Motor, Murata and other firms with large international sales. A stronger yen reverses that benefit, and Thursday's reaction showed investors repricing those earnings assumptions.

Domestic-demand names, by contrast, stand to gain. Airlines, utilities and retailers benefit from lower import costs as the yen firms and oil prices ease, a dynamic that could support rotation away from export-heavy sectors. Brent crude has retreated from levels near $90 as diplomatic efforts in the Middle East progress.

The immediate focus is NTT's earnings, due later Thursday, and whether the yen holds in the 155-157 range. A renewed slide toward 160 would pressure the BOJ to act again, while a sustained firming could give the central bank room to assess whether inflation is becoming entrenched before its next move.

This article is for informational purposes only and does not constitute investment advice.