Japan's stock market recorded its largest single-day gain on the first trading day after the Golden Week holiday. The Nikkei 225 index closed on May 7 at 62,833.84, up 3,320.72 points (5.58%), setting a new record. During trading, it briefly surpassed 63,000 for the first time. This increase exceeded the previous record gain of 3,217 points following the 'Black Monday' crash in August 2024. However, the percentage increase did not rank among the top 20 in history due to the high index level.
The surge was attributed to a rally in U.S. tech stocks and optimism that tensions between the U.S. and Iran might ease. AI and semiconductor stocks drove the market higher, with SoftBank Group hitting its upper price limit. Kioxia Holdings saw a massive influx of buy orders, closing at 43,410, up 7,000 points (19.22%), boosting its market cap to 23.7 trillion yen, making it the sixth largest on the Tokyo Stock Exchange. The occurrence of stop-go trading for stocks exceeding 1 trillion yen in market cap is unusual. Advantest and Tokyo Electron also performed strongly, with Tokyo Electron reaching a new high adjusted for stock splits.
Analysts noted that positive news accumulated during the holiday period contributed to the market's performance. The Nasdaq and Philadelphia Semiconductor Indexes reached new highs, and AMD reported first-quarter profits nearly double those of the previous year. Kioxia's joint venture with SanDisk also reported strong results, prompting a nearly 30% stock price increase. Goldman Sachs raised its 2028 operating profit forecast for Samsung Electronics to 494 trillion won, significantly higher than the 2025 forecast for Toyota Motor Corporation.
Investor anxiety about missing out on the AI and semiconductor rally intensified. Takayuki Ishibashi, a vice president at Goldman Sachs, stated, "There is a strong fear of not holding AI and semiconductor stocks." The market is seeing a trend where rising stocks continue to climb. Increased buying linked to index futures and trend-following foreign funds contributed to the rapid rise, as investors who had sold call options for hedging prior to the holiday began to buy back, accepting losses. Easing oil prices due to reduced Middle East tensions also alleviated inflation concerns, creating a favorable environment for growth stocks.
The upward trend was not limited to large tech stocks. The TOPIX index rose 111.76 points (3.00%) to close at 3,840.49, while the JPX-Nikkei 400 gained 1,079.04 points (3.18%) to finish at 35,060.73. Trading volume on the Tokyo Stock Exchange's Prime Market reached 10.84 trillion yen, the highest since the market's inception in 2022. Approximately 75% of stocks rose, totaling 1,190 gainers. However, some domestic stocks, including trading companies and pharmaceuticals, faced selling pressure, and INPEX declined as oil prices stabilized. Nintendo experienced selling pressure due to concerns over rising memory semiconductor costs.
However, signs of market overheating are evident. The NT ratio, which divides the Nikkei index by the TOPIX, reached a historic high of 16.3, indicating an unprecedented concentration of large-cap stocks in the market. The deviation from the average over the past 25 trading days also exceeded the typical 5% threshold considered 'overheated.' Nomura Securities noted that past trends suggest the Nikkei's rise may not be sustainable. Hideyuki Ishiguro, chief strategist at Nomura Asset Management, remarked, "A market concentrated in specific stocks is unlikely to last long." Takatoshi Itoshima, a strategist at Pictet Japan, expressed hope for a rebound in cyclical stocks like automobiles and banks, which are more influential on the TOPIX, as geopolitical risks recede. For the Nikkei to maintain its momentum beyond AI and semiconductor stocks, broader buying interest is essential.
* This article has been translated by AI.
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