Japan's Nikkei 225 slumped nearly 3% on Friday, with the benchmark down 2.8% and reversing Thursday’s 1.1% advance, as a renewed sell-off in global technology shares overwhelmed the Bank of Japan’s widely expected decision to leave interest rates unchanged. The hardest selling was concentrated in technology heavyweights, with chip equipment makers Advantest falling 9.1%, Tokyo Electron losing 5.6%, and SoftBank Group dropping 6.7%. Ibiden plunged 15.2% and Lasertec declined 13.8%, while the broader Topix fell a milder 1.3%.
The selling started before the BoJ decision after Wall Street losses: the Nasdaq Composite fell 1.4% on Thursday and Alphabet plunged 12.6% as investors scrutinised the cost of its AI expansion. Weak extended-hours reactions to Intel and Amazon results added to concerns about the cash required to build data centres and buy computing equipment. Nomura Securities strategist Maki Sawada told Reuters: “The Japanese stock market is being affected by this fall in US technology shares.”
The Bank of Japan held its benchmark rate at 1.25% in an eight-to-one vote, following September’s increase. Board member Hajime Takata wanted another rise to 1.5%, underscoring division over the pace of tightening. The central bank acknowledged underlying inflation had reached roughly 2%, strengthening the case for another move before year-end. Tokyo prices excluding fresh food and energy rose 2.6% in October, slowing from 2.9% in September. Japanese government bonds attracted buyers as shares weakened, pushing the ten-year yield towards 2.78%.
Markets had priced in roughly an 80% probability of a December rate rise before Friday’s decision. ANZ economists expect the BoJ to increase borrowing costs by a quarter-point in December and again in March. BNP Paribas economist Ryutaro Kono said: “The BOJ probably sees a need to raise the rate towards neutral as soon as reasonably possible,” while cautioning that inflation risks did not yet require consecutive increases. The next round of Japanese corporate results is now seen as unusually important, with strong chip-equipment order books potentially countering fears of an AI spending slowdown, while cautious guidance could intensify pressure on stretched valuations.
For cryptocurrency markets, the combination of global equity weakness, AI-led risk aversion and signals of further Bank of Japan tightening may reinforce a cautious near-term tone, although the original report does not mention digital assets directly.
