CIO Perspectives - Japan Equity: View on Recent Market Turmoil and Outlook

Japanese equities face further near-term pressure from deteriorating sentiment toward the AI semiconductor business, while the sell-off has improved market valuations.

• The Nikkei 225 fell about 6% on November 6 to 57,434.77, entering the 50,000 range for the first time in roughly six months and standing about 20% below its June 25 high of 72,366.34.
• The decline appears driven by growing pessimism over AI semiconductor demand and data-center investment rather than by the U.S. midterm election results themselves.
• Uncertainty around Anthropic’s planned U.S. listing later in November and the earlier rise in AI semiconductor stocks could create additional technical pressure toward year-end.
• The Nikkei-TOPIX ratio fell from 17.5 in June 2026 to 15.5 on November 6, close to its level at the start of the year.
• The TOPIX forward PER, based on Nomura Securities’ average fiscal 2026 and 2027 forecasts, declined to 14.9, while interim results showed that corporate earnings remained strong.

Takeaway: Japanese equities may remain under pressure in the short term, yet the correction has created more attractive valuations, supporting a recovery if prices begin to reflect company fundamentals more closely.