Nikkei Falls on Hot U.S. Inflation, Tech Selloff

Chip-related names led the losses. Advantest sank 11%, Tokyo Electron fell 6.5% and SoftBank Group dropped almost 10% as traders rushed out of the AI trade. The selloff followed U.S. inflation data that came in hotter than expected, lifting Treasury yields and the dollar and making long-duration growth stocks less attractive.

The move in Tokyo fits a broader global unwind in risk assets. Asian markets were hit across the board, with South Korea’s Kospi plunging 7.7% and Samsung down more than 9%, wiping out roughly 90 billion euros in market value. In the U.S., the prospect of tighter-for-longer Fed policy has also kept pressure on rate-sensitive sectors, especially technology.

For investors, the key issue is whether the selloff marks the start of a deeper correction in AI and chip shares or just a sharp de-risking after a long rally. The Nikkei had been supported by gains in exporters and tech, but higher U.S. yields and a firmer dollar can quickly reverse those flows, especially when positioning is crowded.

Technical indicators also suggest momentum has weakened after the pullback. The Nikkei’s 50-day moving average sits around 66,276, while the index’s RSI reading has dropped to 46.2, down from levels that had pointed to an overbought market earlier in the year.

The next catalyst is whether more U.S. inflation data and Federal Reserve commentary confirm that rate cuts are further away, which would keep pressure on Japanese chipmakers, AI plays and broader Asian equities.