Nikkei Surges Over 2,000 Points as Korean Market Volatility Dampens AI Stock Sentiment
N.R. Finch
The Nikkei rose more than 2,000 points on Wednesday, led by AI and semiconductor names, but fund managers warn the rally is driven by short-term futures money — not returning long-term foreign buyers — raising doubts about staying power.
Who is buying — and why does this feel different from April–May?
Ibiden — a substrate supplier to Intel and Nvidia — led gains after strong earnings. Advantest, Fujikura, and Kioxia Holdings rallied in tandem, dominating the Nikkei's leaderboard.
A Japanese brokerage trader said the excitement is gone: in April–May, heavy long-term overseas capital poured in; Wednesday's move was driven mainly by index futures and other short-term money.
This means → the headline gain looks similar, but the buyer profile is completely different. Short-term money arrives fast and leaves fast — far less durable than long-term allocation.
Why won't fund managers add exposure?
Naohide Une, CEO of Investment Lab, said the July AI-stock sell-off is still fresh. With volatility elevated, Japanese equity fund managers struggle to raise risk exposure.
He believes the market bottomed in July's plunge, but "launching an immediate counterattack" is unrealistic. The earliest window for international investors to re-engage may be September.
In plain terms = the bottom is probably in, but managers were burned badly enough that they would rather miss upside than risk another drawdown.
Why are the Japanese and Korean markets starting to move as one?
In early April, a two-week U.S.–Iran ceasefire triggered global AI buying. The Nikkei and KOSPI — both heavily weighted toward AI names — surged in lockstep. Markets have since treated the two indices as near-interchangeable proxies.
On Wednesday, when KOSPI trimmed its gains mid-session, the Nikkei immediately came under pressure — Korean supply-demand-driven swings are spilling directly into Japan.
This reflects a deeper risk: Japan-specific fundamentals — corporate earnings, domestic demand — are being overshadowed by cross-market momentum trading.
How is yen strength blocking another path?
Toru Ibayashi of H Fund Investment noted that coordinated U.S.–Japan currency intervention has pushed the yen higher, sapping appetite for export-oriented stocks such as automakers.
AI names lack conviction too. He put it bluntly: "The Japanese market has no trading theme right now."
He disclosed that he sold Nikkei futures around 70,000, bought them all back around 62,000, and now plans to stand aside. In plain terms = even an active futures trader has chosen to sit on his hands.
Could September be the turning point?
Bank of America Securities Japan will host a five-day investor conference ending September 4. Sign-ups already exceed last year, and meeting requests for AI-related companies are up roughly fourfold.
Une sees this as a potential catalyst for international investors to take a fresh look at Japanese equities.
This means → the key test is whether corporate fundamentals can keep pace with share prices by then. If earnings data cannot support current levels, this rally may prove to be nothing more than a short-term trade.
Content is for reference only, not financial advice.