AI and chip stocks drag Nikkei lower as banks rise

2026-06-05

In the Tokyo stock market on the 5th morning, the Nikkei Stock Average extended losses and closed at 66,661, down 809 yen from the previous day. While profit-taking hit artificial intelligence and semiconductor-related stocks that had led the market, buying came into financials and domestic-demand shares, with about 80% of TSE Prime-listed issues rising.

Sell-off集中 in AI and semiconductors

The Nikkei Average came under selling pressure soon after the open, and its drop at one point exceeded 1,600 yen. Just Advantest and Tokyo Electron pushed the index down by more than 700 yen combined. Shin-Etsu Chemical and Ibiden also fell, while SoftBank Group at one point dropped 3.68%.

US semiconductor losses spill over

The move followed a more than 2% drop on the previous day in the Philadelphia Semiconductor Index (SOX), which comprises major semiconductor stocks, on the US stock market. Kazuyuki Muramatsu, head of investment management at Wa Capital, said AI and semiconductor stocks that had run up rapidly and were sitting on profits became targets for selling, while adding that medium- to long-term growth expectations have not been undermined. He said it was merely a pause to cool overheated conditions before the next advance.

Funds rotate into bank stocks

Although the Nikkei Average has fallen nearly 2,000 yen from its closing high set on the 3rd, investor sentiment has not deteriorated. On the 5th, about 80% of issues on TSE Prime advanced. Kazuaki Shimada, chief strategist at IwaiCosmo Securities, sees it as healthy that cyclical buying is spreading beyond AI and semiconductors across the market. He said funds that had exited on profit-taking are flowing into lagging stocks.

Bank stocks are the main beneficiaries. Sumitomo Mitsui Financial Group rose 1.43% and renewed its all-time closing high for the first time in about four months since February 12. Mitsubishi UFJ Financial Group also updated its record high for a second straight day.

Expectations for a Bank of Japan rate hike are also supporting the sector. The probability of a rate increase at the June meeting, based on the overnight indexed swap market, has risen to above 90% from around 70% at the end of May. Investors also took note of BOJ Governor Kazuo Ueda's remarks in a speech in Tokyo on the 3rd that the central bank needs to carefully debate whether to raise rates.

Buying also spreads to insurers and retailers

Buying in lagging shares also spread to insurers and retailers. T&D Holdings, which announced a share transfer, at one point rose 8.48% and hit its highest level in about 19 years. Aeon gained 1.60% and Seven & i Holdings rose 0.97%.

Spot prices for Dubai crude from the Middle East fell on the morning of the 5th. While peace talks between the United States and Iran remain deadlocked, Daiki Takei, strategist at Resona Holdings, said funds are rotating into lagging stocks with a high likelihood of improving earnings.

Later in the day, Japan time on the night of the 5th, the US employment report for May will be released. Leading indicators have pointed to resilience in the labor market, drawing attention as a gauge of the US economy. Next week, the planned initial public offering of US space company SpaceX and the release of the US consumer price index (CPI) are also due, and depending on the outcomes, volatile trading could continue.

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