A sharp rebound, back to where the week began

What Moved Tokyo

Tokyo stocks surged as U.S. technology earnings triggered a powerful repurchase of AI and chip shares, while the yen and Japanese rates shaped the afternoon setup after the Bank of Japan kept policy steady.

Friday morning was not simply a “BOJ hold rally.” Its main force was the rapid reversal of the selling that had battered AI and semiconductor shares on Tuesday and Wednesday. Microsoft’s strong cloud results, its guidance on capital spending and a 15.5% jump in its shares restored confidence that AI infrastructure spending can still produce cash and earnings. Amazon’s cloud growth added to the reassurance. The S&P 500 finished Thursday up 1.66%, while the Nasdaq Composite gained 2.78%. Tokyo received that strong technology handoff with a market already primed for a squeeze after two punishing sessions.

The second force was the yen. USD/JPY had been near 163.60 at Thursday’s Tokyo close before plunging as low as 157.96 overseas. Market participants focused on suspected Japanese yen-buying intervention, a reported U.S. rate check and unusually clear U.S. support for Japan’s effort to resist disorderly weakness. The dollar recovered to around 160.57 by 11:31 a.m. JST and to about 160.76 after the BOJ decision. A stronger yen would normally restrain exporters, but Friday’s repurchase of beaten-down AI leaders was more powerful than the translation headwind.

The BOJ then held its short-term policy target at 1.0%. The decision was expected, but it was not entirely dovish. The vote was 8–1, with Hajime Takata favoring 1.25%, and the central bank again signaled that borrowing costs can rise further if the economic and inflation outlook is realized. That leaves the afternoon with several live questions: whether the yen’s post-decision weakening extends, whether bank shares retain their morning gains, and how much risk investors are willing to carry into Governor Ueda’s 3:30 p.m. press conference.

The numbers describe movement, not direction. The Nikkei fell as low as 60,448.90 during Wednesday trading—about 6.4% below the previous Friday’s close. By Friday morning, its week-to-date loss was just 0.06%. TOPIX was also virtually unchanged from last Friday. Five days of dramatic news had taken both benchmarks on a round trip.

The market beneath those index levels was not unchanged. Domestic and value shares offered relative protection on Tuesday and Wednesday. Friday’s rebound was driven instead by expensive, index-heavy AI stocks. The gap between the Nikkei’s 4.37% gain and TOPIX’s 1.48% rise shows that this was not an even recovery across corporate Japan. Concentration returned with the optimism.

Today’s Market Mover

Advantest is today’s mover, but this was not a session driven solely by a company-specific announcement. U.S. cloud and AI earnings, the violent rebound in South Korea’s SK Hynix and Samsung Electronics, and the unwinding of defensive or short positions built earlier in the week all turned at once. As a maker of semiconductor test equipment, Advantest is one of the Nikkei’s clearest and most index-sensitive expressions of confidence in global AI capital spending.

The confidence level is Medium because the price action is clear while the causation is distributed. This was less a one-company revaluation than a sudden change in the market’s verdict on global AI spending—from financial burden on Tuesday to evidence of growth on Friday. The depth of the earlier decline magnified the rebound.

Sector Pulse

Leading: semiconductors, AI infrastructure and electronics

Advantest, Tokyo Electron and SoftBank Group drove the Nikkei, while Mitsubishi Electric also rose in early public quotes. Thursday’s U.S. session restored confidence that AI spending is not merely destroying cash, and Tokyo’s expensive technology names absorbed the largest benefit.

Financials: no hike today, but the path remains open

Bank shares advanced early, with Mizuho Financial Group reported more than 3% higher in initial trading. A 1.0% hold does not erase the earnings opportunity from normalization: Takata’s 1.25% proposal and the BOJ’s further-hike language preserve a medium-term case for wider lending margins. Yet the 10-year JGB yield eased toward 2.79%, making the banks’ ability to hold the morning gains an important breadth test.

Lagging: the wider market and selected pharmaceuticals

TOPIX’s much smaller gain tells the story of an uneven rebound. Daiichi Sankyo declined following a reported analyst downgrade, leaving part of the pharmaceutical sector outside the AI enthusiasm. Yen strength is an earnings-translation headwind for autos and other exporters, although lower geopolitical stress and the general recovery in risk appetite softened the impact.

Yen Watch

This week, the yen reminded traders that policy presence can matter as much as the level itself. After weakening into the upper 163 range per dollar, USD/JPY fell as low as 157.96 in overseas trading on Thursday. Suspected official yen buying, a reported New York Fed rate check and visible U.S. support forced traders to reconsider the cost of maintaining large short-yen positions.

The dollar’s return toward 160.76 after the BOJ hold does not mean the intervention signal failed. It means the market is balancing two ideas: authorities have shown that the 162–165 area carries policy risk, but the U.S.–Japan rate gap and entrenched speculative yen selling do not disappear in one session.

The real-economy consequences cut both ways. Fast yen appreciation is negative for exporters’ translated profits, but helpful for households, importers and buyers of energy and food. It modestly reduces inbound tourists’ purchasing power while making overseas travel less costly for Japan residents. The yen was not simply an equity prop this week. It was the common variable connecting corporate profits, household inflation, tourism and policy credibility.

Rates / JGB Watch

The public interbank quote for the 10-year JGB yield was near 2.79%, roughly one basis point below the prior session. The BOJ hold created no immediate new step in short-term funding costs. Still, the 8–1 vote, the dissent for a hike and the renewed warning about upside inflation risk give the bond market a reason to keep debating the timing—not the existence—of further normalization.

Higher rates can improve earnings opportunities for banks and insurers, but pressure leveraged companies, real estate and the government’s interest bill. A 2.79% 10-year yield is high enough to transmit the end of ultra-low rates into ordinary financing decisions. At 3:30 p.m., investors will listen for Ueda’s explanation of the conditions for an October or later hike, the inflation effect of the weak yen and the BOJ’s tolerance for volatility in the government-bond market.

Global Handoff

Because this is a Tokyo midsession edition, Friday trading in Europe and the United States has not started. The handoff therefore begins with Thursday’s U.S. close and Friday’s Asian session.

Microsoft’s 15.5% advance helped lift the S&P 500 by 1.66% and the Nasdaq Composite by 2.78%. Amazon’s cloud growth reinforced the argument that heavy AI investment can generate revenue. At the same time, the U.S. 30-year Treasury yield climbed above 5.24%, its highest area in about 19 years. Japan receives both sides of that signal: strong AI demand helps its chip supply chain, while high U.S. yields can restart pressure against the yen.

South Korea’s KOSPI rebounded roughly 14% after its earlier collapse, led by huge gains in SK Hynix and Samsung Electronics. That extraordinary move spilled directly into Tokyo’s semiconductor complex. Hong Kong was modestly lower at the same point, so this was not a universal risk-on wave. The next Tokyo open on Monday will depend on whether U.S. and European investors confirm Asia’s AI rebound or use Friday to take profits before the weekend.

Policy / BOJ Watch

The BOJ held the policy rate at 1.0%, avoiding a consecutive increase after June’s hike. But Hajime Takata proposed raising it to 1.25%, and the board retained its readiness to tighten further if the economic and price outlook is realized. Several public analyst reactions characterized the language and dissent as a hawkish shift rather than a comfortable pause.

The policy difficulty is that Japan’s government and central bank are addressing the same yen and inflation problem with different instruments. The currency authorities can buy yen, while the BOJ is trying to normalize rates without destabilizing growth or the bond market. The government, meanwhile, cut its fiscal-2026 real-growth forecast to 0.9% from 1.3% because higher energy costs are squeezing households and profits. Aggressive tightening might support the yen and reduce imported inflation, but it would also add pressure to already softer real growth.

Publisher’s Market Note

Sources and Method

This report was independently written after comparing index-provider, exchange, central-bank, government, public market-data and broadly available financial-news sources. No paid article text was copied or reproduced. Intraday and delayed values are separated from final closes. Market feeds can be delayed and may later be corrected.

Editorial notice: This is market journalism, not investment advice.