The Nikkei 225 Index retreated by more than 1.25% on August 6, as heavyweight technology names including SoftBank Group, Kioxia Holdings, Tokyo Electron, and Advantest pulled the benchmark lower. The index slipped to 65,455 points, a notable drop from its year-to-date peak of 72,845, as investor sentiment turned cautious ahead of SoftBank's earnings release.
Tech sector under pressure
Technology stocks, which had powered the Nikkei's record run, have recently shown heightened volatility. SoftBank shares fell 6% and are now more than 30% below their yearly high, as traders await the conglomerate's quarterly results for clues on its portfolio performance. The company has faced headwinds from a sharp decline in Arm Holdings—one of its key stakes—which has dropped from $450 to $274. Additionally, OpenAI, another major holding, is encountering intensifying competition from rivals like Anthropic and Moonshot, prompting price cuts and a delay in its planned IPO.
Kioxia Holdings, another prominent Nikkei component, plunged over 8% amid a broader selloff in memory chipmakers. The stock has now fallen more than 55% from its all-time high, mirroring the trajectory of peers such as Samsung, SK Hynix, and SanDisk. This decline persists even as Kioxia has demonstrated robust revenue and profitability growth, supported by rising memory prices.
Other tech names have also retreated, despite continued capital expenditure commitments from major U.S. firms like Microsoft, Meta Platforms, and Alphabet. The sector's recent weakness suggests investors are reassessing valuations and growth prospects amid global economic uncertainty.
Yen resumes downtrend
The Nikkei's movement is also tied to the Japanese yen's performance. The USD/JPY pair, which had fallen from its year-to-date high of 163.97 to 155.20 following intervention by the Bank of Japan (BoJ) and the U.S. government, has since climbed back to 157.72. Media reports indicate the BoJ spent over $50 billion defending the yen last week, while the U.S. swapped some euro holdings for yen, with officials pledging further support.
This pattern mirrors the April episode, when the pair dropped to 155.60 after intervention but then resumed its uptrend, eventually reaching a multi-decade high. The renewed yen weakness raises the possibility that the BoJ may hike interest rates to narrow the gap with the U.S., a move that could impact Japanese equities.
Technical outlook
From a technical perspective, the Nikkei 225 appears to be forming a bullish flag pattern, with the index having retested the upper boundary of a descending channel. It remains above the 100-day moving average, which has provided consistent support. If the breakout holds, the next target could be the psychological level of 70,000.
However, the near-term direction hinges on SoftBank's earnings and the yen's trajectory. A stronger yen could pressure exporters, while a weaker one might support corporate profits. Investors will also monitor any BoJ policy signals in the coming weeks. For related context, see our coverage on the recent Nikkei rally and Hong Kong's tech-driven gains.
This article is for informational purposes only and does not constitute financial advice.
