Japan's Nikkei rallies as AI exuberance overrides Iran war concerns

TOKYO: Japan’s Nikkei share average rose on Wednesday as AI enthusiasm crept back into the market, overriding concerns about escalation in the Middle East crisis.

The benchmark Nikkei 225 advanced 0.43% to 65,549.88, recovering from an early slide.

The broader Topix rose 0.24% to 4,059.87.

Business confidence among big Japanese manufacturers climbed in September to its highest level since December 2021, buoyed by robust semiconductor and data-centre-related demand, a Reuters monthly poll showed on Wednesday.

While the US market was weighed down overnight by concerns over the Iran war and rising oil prices, the Philadelphia SE Semiconductor Index still posted a 1.3% gain.

News that Verizon signed a multi-billion-dollar deal with Corning to supply high-density optical fibre for AI infrastructure boosted Japanese cable makers such as Fujikura, said Maki Sawada, an equities strategist at Nomura Securities.

“Semiconductor and AI-related shares are performing strongly, lending a positive contribution to the Nikkei 225,” Sawada said. Japanese equities also contended with a stronger yen, holding near a seven-month high on expectations of accelerated rate hikes by the Bank of Japan as soon as next week’s meeting.

“As the market appears to have largely priced in the yen’s appreciation, the trend is expected to shift toward buying on dips once the initial selling subsides,” Sony Financial Group analysts said in a note.

There were 109 advancers on the Nikkei 225 against 116 decliners.

The largest percentage gainers in the index were Furukawa Electric, up 13.20%, followed by Fujikura, 8.75% higher, and Lasertec, which gained 6.56%.

The largest losers were Kyowa Kirin, down 5.12%, followed by Sumitomo Pharma, 5.02% lower, and Nikon , which lost 3.63%.