Has the Japanese stock market fallen to a one week low for position adjustment?

On Thursday (October 17), the Japanese stock market closed lower, with chip stocks sliding despite better-than-expected earnings reported by TSMC, a star company in the chip industry. Investors are waiting for more financial results from domestic and foreign companies to find further direction.

By the close, the Nikkei average index of 225 stocks fell 269.11 points, or 0.69%, to close at a one-week low of 38,911.19 points. The broader Topix index fell 2.83 points, or 0.11%, to 2,687.83 points.

In the primary mainboard market, precision instruments, non-ferrous metals, and chemical stocks led the decline.

In the afternoon trading, selling expanded, with 127 out of the Nikkei's 225 constituent stocks closing lower, including the heavyweight stock Fast Retailing, which fell 1.1%.

Major technology stocks fell for the second consecutive trading day, dragging the Nikkei index lower. Previously, ASML lowered its full-year sales expectations, sparking concerns about demand, leading to a plunge in chip-related stocks in the previous trading day.

Although TSMC reported a 54% jump in third-quarter profits, exceeding expectations, the decline in technology stocks temporarily narrowed, but TSMC, as a major producer of advanced chips used in artificial intelligence applications, failed to reverse the overall trend.

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The share price of chip testing equipment manufacturer Advantest rebounded slightly but still fell 0.6%, while chip manufacturing equipment giant Tokyo Electron fell 3.2%, becoming the biggest drag on the Nikkei index. Silicon processor manufacturer Shin-Etsu Chemical slid 1.4%. Chip manufacturing equipment supplier Disco fell 1.5% before releasing its financial report.

"The market is in a cautious mood," said Kazuo Kamitani, a strategist at Nomura Securities Investment Content Department, attributing the reason to Dutch chip equipment manufacturer ASML's earlier this week lowering its earnings forecast for 2025. He said, "Semiconductors and electronic components used for artificial intelligence and new smartphones are performing well, but products outside these areas seem to be underperforming, causing investors to worry."

Nomura strategist Maki Sawada said that starting next week, manufacturers will release their financial reports one after another, and investors are also closely watching.

"Today's market trend feels mainly to be a position adjustment in response to the upcoming financial reports," the strategist said.Traders indicated that, due to strong U.S. economic data, the market anticipates a smaller reduction in U.S. interest rates, propelling the dollar to remain robust in the Tokyo market and essentially stable against the yen in the mid-149 range.

As the yen struggles near the 150 level against the dollar, automobile stocks closed higher, which is beneficial for exporters, but the gains have narrowed from the morning session.

Subaru Corporation rose by approximately 2.3%, Nissan Motor Company increased by 1.3%, and Toyota Motor Corporation gained 1%.

Exporters typically benefit from the depreciation of their domestic currency when overseas earnings are repatriated.

Financial stocks performed strongly, with the help of their U.S. counterparts, following Wall Street's higher close on Wednesday, with Mizuho Financial Group up by 2.2% and Mitsubishi UFJ Financial Group up by 1.9%.