According to Jinshi Data, on July 25, the Nikkei 225 index underwent a technical adjustment, falling more than 3% on Thursday due to the reversal of the AI-driven tech stock rally and concerns about the Bank of Japan's interest rate hike, and fell at least 10% from its all-time high two weeks ago.
Tomo Kinoshita, global market strategist at Invesco Asset Management Japan, said the sharp decline in Japanese stocks was driven by a fall in U.S. stocks. Expectations of a Bank of Japan rate hike led to an appreciation of the yen, and export-oriented and borrowing-dependent stocks fell.
Semiconductor stocks were hit hardest, with Tokyo Electron falling 5.6%. Disappointing earnings from Tesla and Alphabet raised concerns that the semiconductor stocks' rally was too strong. The Nikkei Volatility Index rose to 21.30, the highest in three months.