Japan's Nikkei slides into correction zone on tech selloff, Middle East conflict

[TOKYO] Japan’s Nikkei tumbled into correction territory on Friday (Jul 17), as a global rout in chipmakers and an escalation in the Middle East conflict prompted investors to shun risk assets.

The benchmark Nikkei 225 sank 4.03 per cent to close lower at 64,141.12, after falling as much as 6.18 per cent. The index is now down 11.3 per cent from its all-time high close of 72,366.34 on June 25. The broader Topix slipped 2.72 per cent to 3,919.21.

The decline followed overnight losses in US equities, where technology stocks tumbled, while US economic data showed strength and corporate earnings season was robust. Hawkish remarks from Federal Reserve officials on Thursday reinforced expectations for further US rate hikes.

The Philadelphia SE Semiconductor index tumbled 4.3 per cent overnight, while the US-listed shares of South Korean chipmaker SK Hynix plunged more than 13 per cent.

With South Korea’s market closed for a holiday, selling pressure intensified on Japan’s technology market, and notably on Kioxia Holdings, said Daisuke Hashizume, a senior strategist at Daiwa Securities.

“The long-term trend for AI and data centres is unchanged, but right now investors are worried that memory chip prices can rise sustainably,” Hashizume added.

Geopolitical tensions also remained elevated, with US President Donald Trump threatening a broader escalation in strikes on Iran.

Breadth was overwhelmingly negative, with 71 advancers in the Nikkei 225 against 152 decliners and two unchanged.

Kioxia was the index’s biggest percentage loser, tumbling 16.1 per cent for its steepest one-day decline since November 2025. It was followed by Sumco, down 15.17 per cent, and Screen Holdings, which lost 12.04 per cent.

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AI euphoria in Japan is encapsulated in the fortunes of Kioxia, a once-struggling chipmaker whose market capitalisation briefly surpassed that of Toyota last month. But its share price has fallen more than 50 per cent since then.

“I believe the market correction is dragging on as a reaction to the sharp rise that preceded it,” said Shoichi Arisawa of Iwai Cosmo Securities. “That said, I don’t think the business environment surrounding AI and semiconductor companies, or the current outlook for semiconductor demand, has changed.”

Seven & I Holdings was among the top gainers in the Nikkei, rising 3.64 per cent after the company said it was in talks to buy a stake in Polish convenience store operator Zabka Group. REUTERS