Japan's Nikkei rises 2% on AI rally as pension asset shift hopes lift yen, bonds

TOKYO: The Nikkei share gauge rose on Friday, underpinned by a rally in AI-related stocks, while the country’s bond market and currency also advanced on a potential redirection in the investment strategy of Japan’s vast pension funds.

The benchmark Nikkei 225 was up 2% at 69,121.02, while the broader Topix rose 0.76% to 4,050.82. The yield on Japan’s 10-year government bond fell 10 basis points (bps) to 2.775%, retreating from a three-decade high.

The yen strengthened 0.43% against the greenback to 161.69.

Tech shares on Wall Street soared after chipmaker Micron Technology laid out plans to invest more than $250 billion in the United States through 2035.

“Japanese stocks took cues from the rally of the US technology stocks overnight,” said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

“The market also turned optimistic that the US and Iran would continue peace talks, and the oil prices fell.”

Chip-related shares led the Nikkei’s gains, with Sumco surging 15.40%, set for its highest close since September 2007, and Advantest jumping 8.54%.

SoftBank Group, a tech investment conglomerate, climbed 11.33%.

The gains in bonds and the currency followed comments from Finance Minister Satsuki Katayama on Thursday that the government would explore measures to encourage pension funds, including the Government Pension Investment Fund (GPIF), to increase investments in domestic financial assets.

The prospect of Japan’s largest pension investors directing more funds into local markets boosted sentiment across bonds and the yen, both of which have faced sustained pressure in recent years.

“Katayama’s remarks helped reverse the selling trend of the Japanese government bonds, and the yen,” said Masahito Sugawara, a senior strategist at Daiwa Securities.

“Now half of the assets of Japanese pension funds are invested in foreign assets.

The market bet a possible shift of the asset allocation would be positive to Japanese assets.“

Retail trade and insurance sectors lagged, with Fast Retailing falling 4.23%, marking its steepest one-day drop since November 2025, and Tokio Marine Holdings losing 3.02%.

There were 116 advancers in the Nikkei 225 against 107 decliners, with two stocks unchanged.