Japanese stocks dropped the most in over six months on Wednesday, led by tech shares, amid a global slump driven by mounting concerns of excessive valuations.
Nintendo bucked the trend, rising after it posted better-than-expected quarterly earnings and raised its Switch 2 sales target.
The Nikkei declined 4.1% to 49,363.68 as of 11:03 a.m. The Topix index fell 2.9% to 3,213.10. Both benchmarks saw their steepest intraday declines since April 11.
Tech stocks were the biggest drags on the broader Topix, with SoftBank Group losing as much as 14%, the most since August 2024, and Advantest, Disco and Furukawa Electric also weak.
The decline comes amid a plunge in equities worldwide after Wall Street CEOs warned of the risk of market pullback.
Artificial intelligence-linked names such as SoftBank, which have hit record highs this year as they pour investment into the new technology, are most vulnerable to selloffs as risk appetite recedes, said Anna Wu, cross-asset investment strategist at VanEck.
“This is a reckoning moment after the massive run we had, as valuations are starting to take center stage,” said Wu. “We very much could see a correction.”
“For the likes of SoftBank, which is so richly-valued, investors are waiting for the next narrative. They’re now taking a ‘show-me-the-money’ approach,” she said.
Tailwinds from pro-stimulus Liberal Democratic Party President Sanae Takaichi’s appointment as prime minister last month are now fading, too, as investors await more clarity on the implementation of her spending policies, Wu added.
