AI shares lead Nikkei above 72,000 for first time

2026-06-22

Japan's Nikkei share average closed on Monday up 1,398.41 points, or 1.96%, from the previous session at 72,648.47. At one point, the benchmark had risen by nearly 1,500 points, topping 72,000 for the first time. Along with strength in AI-related stocks, reports that the government had outlined public-private investment plans also helped spur buying, as investors begin to see AI as driving a 'fourth industrial revolution'.

Buying in AI names

US markets were closed on Friday for the Juneteenth holiday. In Europe, major indexes including the FTSE 100 and Germany's DAX fell broadly, but the Nikkei briefly slipped after the open before turning higher and rising above its intraday high of 71,952 on Friday.

Leading the advance were physical AI shares, which use AI to enable robots and other machines to operate autonomously. Fanuc, the world's largest industrial robot maker and a bellwether in the sector, at one point rose 9%, while another market favourite, Yaskawa Electric, climbed 11%. Nabtesco and Harmonic Drive Systems, which make precision reducers used in robot joints, also jumped sharply, drawing renewed buying into physical AI stocks that had recently struggled to break higher.

Tetsuro Ii, president of Commons Investment Trust, said, 'It is no exaggeration to call the AI revolution a fourth industrial revolution. As massive investment by US hyperscalers continues, companies that benefit will face a strong tailwind to earnings.' Views are spreading that capital flowing into AI will not be a temporary boom.

Policy hopes and better supply-demand

Looking back at industrial revolutions, the first began in the late 18th century with water power and steam engines, followed by the second in the early 20th century, driven by mass production using electricity. The third emerged from the early 1970s, centred on automation through electronics and information technology. Market hopes are now growing that AI will be the next shift.

In the internet era, giant tech companies such as Nvidia and Apple rose to prominence as the Magnificent 7, but Japanese companies failed to ride that wave. This time, however, many see major opportunities for Japan as well. Ii said, 'AI adoption requires innovation in both hardware and software, and Japanese manufacturers with their broad hardware base will be in the spotlight.'

In fact, the Japanese government is eager to promote growth investment tied to AI, and market participants are watching closely. Buying was also accelerated by reports on Monday that the full scope of public-private investment in 17 strategic sectors included in the growth strategy had become clear. The Nikkei on Friday reported that public and private sectors will invest 10.5 trillion yen in physical AI through fiscal 2040. The government is targeting more than 370 trillion yen in total public-private investment across all sectors.

Kouhei Ohnishi, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, said, 'The specific investment amounts have become clear. The government's focus on areas where Japan can demonstrate its presence within the AI supply chain has also been shown, and policy expectations have risen.'

Dividend reinvestment also helps

In Japan, the shareholder meeting season has begun, and stock gains were also supported by expectations of improved supply-demand from seasonal dividend reinvestment. According to an estimate by Takahiko Masuzawa, head of equity trading at Phillip Securities Japan, the total dividends to be paid by companies in the TOPIX index from late May through the end of June during the shareholder meeting season will reach about 12.54 trillion yen.

Companies generally approve profit appropriation proposals at shareholder meetings and pay dividends to shareholders after the meetings. Payments are especially large in late June, when shareholder meetings are concentrated, with 7.66 trillion yen set to be paid between Monday and June 30.

Passive investors such as pension funds that track indexes are generally said to have already reinvested the ex-dividend portion through futures buying at the end of March. Active managers and individual investors, by contrast, are seen reinvesting when they actually receive dividends. As companies step up shareholder returns, dividends are trending higher, making speculation about improved supply-demand easier to gain traction.

If the Nikkei finishes higher on the day, it would mark an eight-day winning streak for the first time since late August to early September 2023. Ohnishi of Mitsubishi Morgan said, 'Although there is some overheating, the likelihood of earnings expansion, especially in AI, is high and there is no major catalyst for selling.' Many investors are also thought to be buying out of fear of missing out, or FOMO, on the rally, suggesting the upward trend may continue for now.

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