TOKYO: Japan’s Nikkei share average fell on Tuesday as heavyweight chip-related stocks tracked an overnight drop in the Nasdaq, with a stronger yen also weighing on investor sentiment.
By 0059 GMT, the Nikkei had declined 1.3% to 39,045.81, while the broader Topix was up 0.36% at 2,768.43 after trading lower in early trade.
The Nasdaq posted its biggest one-day percentage drop since Dec. 18 on Monday as a low-cost Chinese artificial intelligence model prompted a steep sell-off in US chipmakers.
An index of US semiconductor stocks dropped 9.2% in its biggest single-day percentage fall since March 2020 as Chinese startup DeepSeek rolled out a free assistant it says uses cheaper chips and less data.
Overnight, the Japanese yen rose nearly 1% against the dollar to its strongest since mid-December amid the sell-off in US technology shares.
A stronger Japanese currency tends to hurt shares of exporters, as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.
Japan’s Nikkei sees declines as tech shares stumble
In Japan, chip-testing equipment maker Advantest, a supplier to Nvidia, dropped 10% to drag the Nikkei the most.
Chip-making equipment maker Tokyo Electron fell 5.3%.
Technology start-up investor SoftBank Group lost 6%.
“The declines might remind us of a big market swing (in early August) after the Bank of Japan (BOJ) raised its policy rate in July,” said Kazuo Kamitani, an equities strategist at Nomura Securities.
But he said there were a few differences now that could support the stock market, pointing out the firmness of the US economy.
The BOJ is not as hawkish as it was in July, he said.
The BOJ on Friday raised interest rates by 25 basis points to 0.5%, highest since the 2008 global financial crisis, and revised up its inflation forecasts.
Uniqlo-brand owner Fast Retailing rose 1.15% to become the biggest support for the Nikkei.
Banks rose, with Mitsubishi UFJ Financial Group and Mitsui Sumitomo Financial Group up 3% and 4.3%, respectively.
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