Tokyo's cash equity market opened normally on Thursday, July 9, 2026, despite earlier confusion about a potential holiday. The Japan Exchange Group's 2026 calendar does not list a holiday for July 9, and the Tokyo Stock Exchange operates as usual from 09:00 to 11:30 and 12:30 to 15:25 JST. However, the previous trading session ended on a sour note, with the Nikkei 225 dropping 2.11% to close at 66,819.05, marking its third consecutive loss.
AI and Chip Stocks Lead the Decline
The selloff was concentrated in AI-linked chip stocks, which have been the primary drivers of the Nikkei's recent rally. Shares of companies tied to data center chip optimism, such as Kioxia, Taiyo Yuden, and Murata Manufacturing, suffered steep losses. On Tuesday, Kioxia and Taiyo Yuden fell about 11%, while Murata Manufacturing slid 10%. The decline was not limited to Japan; Samsung Electronics and SK Hynix dropped in Seoul, and in New York, Micron (MU), AMD (AMD), and Intel (INTC) all slipped as investors questioned whether the AI-fueled run-up had gone too far.
Yen Weakens, Intervention Risks Rise
The yen continued to weaken, hovering around 162.45 against the dollar, near levels last seen in 1986. This has raised the specter of currency intervention by Japanese authorities. The dollar/yen settled near 162.52 late Wednesday for a fourth day of gains, keeping traders on edge. Mitsushige Akino, head of Ichiyoshi Asset Management, noted that ETF redemption selling was already priced in, leading some investors to wait on the sidelines.
Fed Minutes Highlight Inflation Concerns
Federal Reserve minutes released on Wednesday showed that some officials wanted an immediate rate hike, reflecting deepening concerns about inflation. The Fed kept its target rate at 3.50% to 3.75%, but traders increased bets on a hike in July and September. Rising U.S. Treasury yields and a stronger dollar have pressured high-valuation growth stocks, including AI and semiconductor names.
Rotation Underway
Despite the broad selloff, not all sectors were affected equally. Domestic-demand names and financials fared better, with banks rising. Naoki Fujiwara, senior fund manager at Shinkin Asset Management, said rotation was still underway, with money moving out of chip stocks into lower-priced value shares. Kazuaki Shimada, chief strategist at IwaiCosmo Securities, called the decline a "healthy correction" and noted that investors were rotating out of chip stocks into value names.
Commodities and Bonds
Oil prices surged on new Middle East tensions, with U.S. crude climbing 6.86% to $75.27 and Brent gaining 7.2% to $79.50. U.S. Treasury yields also rose, further supporting the dollar and putting pressure on growth stocks. Zachary Hill, head of portfolio management at Horizon Investments, said the U.S. action was part of a rotation following a "blistering run" in AI, semiconductor, and memory names, adding that expectations were now "almost impossible to beat."
Outlook
The downside scenario remains in view: if U.S. yields and oil continue to climb, the yen could slide further, increasing the likelihood of intervention and signaling tighter global financial conditions. A sharp yen bounce would cut exporters' currency boost, and more pressure on chip stocks could drag the Nikkei down before value names can step in to stop the selling. Tokyo traders on Thursday will watch to see if buyers step in or hold off, as the market's ability to move past AI stocks faces a critical test.
