Nikkei Falls 2.6% to 62,960.60 as Investors Question Returns on AI Spending
Key Facts
The Nikkei 225 fell 2.6% to 62,960.60 in Friday morning trading, October 30, while South Korea’s Kospi dropped 5.4% to 5,618.76, according to the Associated Press. The losses came amid a technology stock selloff driven by concerns that rising spending on artificial intelligence may not deliver sufficient returns for shareholders. Reuters reported that the Nikkei fell as much as 3% during the session, with chip-related stocks leading the decline. Advantest fell 9.1% and Tokyo Electron dropped 5.6%, according to the agency. At the time the report was published in the morning, investors were awaiting the Bank of Japan’s decision later Friday and signals on the possibility of a rate hike in December.
The moves were not negative across all of Asia: Australia’s S&P/ASX 200 rose 0.5%, the Hang Seng added 1.2%, while the Shanghai Composite lost 0.9%, according to the Associated Press. The moves highlight the divergence in regional market performance in early trading, despite the sharp declines in Japan and South Korea. In Japan, the broader Topix was down 1.3% on Friday and was heading for a weekly loss of 0.4%. By contrast, the Nikkei was up 0.2% since the start of the week at the time of Reuters’ report. The session’s losses therefore came against different weekly performances for the two Japanese indexes.
Technology-sector pressure spread from Wall Street to Asia after steep declines in major U.S. companies’ shares. Alphabet fell 12.6% in Thursday’s session, October 29, and Intel dropped 23% after the close, according to Reuters. The agency said Alphabet’s decline wiped about $500 billion off its market value, while Amazon fell 7% after the close. Nasdaq 100 futures were down 1.4%, signaling continued pressure on technology stocks in subsequent trading. Japanese chip stocks were among the hardest hit, with Advantest and Tokyo Electron falling during Friday’s session.
U.S. stocks posted losses on Thursday, with the Nasdaq Composite falling 1.4% and the S&P 500 down 0.3%, its first loss in four days, according to the Associated Press. In bond markets, the U.S. 10-year Treasury yield fell to 4.8958%, while the 30-year yield fell to 5.2623%, their lowest levels in more than a month, according to Reuters. The agency linked demand for safe-haven assets to concerns about artificial intelligence. In currencies, the yen was steady near 157.815 per dollar ahead of the Bank of Japan decision and was on track for a monthly decline of 0.2% against the U.S. currency. This came as investors awaited the bank’s decision and signals on the path of interest rates.
The Bank of Japan decision was still awaited when the report was published; Reuters said investors were watching to see whether the bank would signal a possible rate hike at its December meeting. EL7 data show the actual reading for the October 30 decision was 1.25%, matching the forecast and the previous reading, which were both 1.25%. Analysts surveyed by Reuters said they expected the rate to rise to 1.5% in December, with increases at a quarterly pace. These were expectations reported by the agency from analysts, while the question at the time of coverage was whether the bank’s comments would strengthen the likelihood of a move in December. An ANZ analyst said, according to Reuters: "I think this is just a pause; the global tightening cycle will continue its course."
In the background to the monetary policy decision, Japan’s seasonally adjusted unemployment rate was 2.4% in September, down 0.1 percentage points from the previous month, according to the Statistics Bureau of Japan. The Bank of Japan had said in its previous forecasts that inflation was likely to remain clearly above 2% from the second half of fiscal 2026. In those forecasts, the bank said it was monitoring the effects of AI-related demand, a weak yen and oil prices. It also said it would continue raising interest rates and adjusting the degree of monetary easing in line with developments in economic activity, prices and financial conditions. These comments put the inflation and monetary policy outlook at the center of investors’ focus on upcoming decisions.
The Bank of Japan’s schedule sets the publication of the Summary of Opinions from its October 29–30 meeting for November 10, 2026, and the meeting minutes for December 23, 2026. The dates follow markets’ wait for signals from the bank on the possibility of a rate hike in December. The November 4 date in the first draft did not match the bank’s schedule; the schedule lists the Summary of Opinions in November and the meeting minutes in December. The bank’s comments and the two subsequent documents will provide opportunities for investors to follow its assessment of economic activity and prices. The possibility of a rate hike in December remains tied to the bank’s signals and developments in economic and financial conditions, as described by the sources.