Japan’s benchmark Nikkei 225 index edged lower on Friday, retreating from a more than two-week high as investors exercised caution ahead of the nation’s upcoming upper house election. The index dropped 0.31% to 39,778.85 by the midday break, after reaching an intraday high of 40,087.59—its highest level since July 1.
The earlier gains were largely driven by the positive momentum from Wall Street, where both the S&P 500 and Nasdaq Composite closed at record highs on Thursday amid robust economic data and earnings that pointed to continued consumer strength in the U.S.
Despite the dip, the Nikkei remains on track to post a 0.5% weekly gain, breaking a two-week losing streak.
Market strategists attribute the pullback to pre-election jitters. “Investors did not want to take a risk in buying stocks ahead of the national election on the weekend,” said Yugo Tsuboi, chief strategist at Daiwa Securities. Still, Tsuboi added that overall market momentum remains healthy, with about half of the stocks on the exchange posting gains.
Political uncertainty looms large, as Prime Minister Shigeru Ishiba’s ruling Liberal Democratic Party (LDP) and its coalition partner Komeito are projected to lose their upper house majority. Analysts are closely watching whether Ishiba will retain his leadership post, as any shift could result in key policy changes—potentially even a cut in Japan’s national consumption tax.
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Among major movers:
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Disco Corp., a chipmaking equipment supplier, plunged 10.26%, becoming the biggest percentage loser on the Nikkei, after its quarterly earnings guidance missed expectations.
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Advantest and Tokyo Electron, both chip-related heavyweights, also fell by 4.27% and 0.7%, respectively.
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In contrast, Fast Retailing, owner of the Uniqlo brand, rose 0.79%, offering significant support to the index, while SoftBank Group gained 1.5% on investor optimism in the tech sector.
Across the Tokyo Stock Exchange’s prime section, 42% of stocks rose, 53% declined, and 4% remained flat, reflecting a divided market sentiment.
As Japan heads into a crucial election weekend, investors are poised for further clarity on the political landscape and its potential impact on economic policy.