Nikkei Average Falls 2,694 Yen, Enters Correction on Semiconductor and AI Rout

The Nikkei Stock Average plummeted 2,694 yen (4.03%) to 64,141 yen on the 17th, driven by a sharp drop in semiconductor and AI-related stocks, entering a correction phase after falling more than 11% from its June peak. The Bank of Japan is considering maintaining its policy rate at 1.0% at its meeting on the 30th, while moving to upgrade its growth forecast on the back of AI demand. Finance Minister Katayama issued an intervention warning, vowing 'decisive steps' against the yen's fall to the mid-162 yen level, heightening market alertness.

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Nikkei Average Drops 2,694 Yen, Enters Correction as Semiconductor and AI Stocks Tumble On the 17th, the Tokyo stock market followed the previous day's decline in US semiconductor stocks, leading to a broad sell-off centered on semiconductor and AI-related issues. The Nikkei average closed at 64,141 yen, down 2,694 yen (4.03%) from the previous day. It fell more than 4,100 yen during the trading session, dropping over 11% from its June high and entering a correction phase. Kioxia Holdings hit the daily limit low, and the unwinding of leverage accelerated as a reaction to the rally in semiconductor stocks. 1 2 3

BOJ to Hold Rates, Upgrade Growth Forecast at July Meeting The Bank of Japan plans to maintain its current policy rate of 1.0% at its policy meeting on July 30-31. Against the backdrop of expanding AI-related demand, it is expected to revise up its real GDP growth forecast for fiscal 2026 from 0.5%, and also revise its economic assessment away from 'downside risks'. The stance of continuing its rate hike cycle will be maintained, with the timing of the next rate increase becoming the focus. 4 5

Finance Minister Katayama Issues Fresh Warning Against Yen Slide to Mid-162 Yen, Vows 'Decisive Steps' In response to the yen's depreciation to the mid-162 yen level against the US dollar in the foreign exchange market, Finance Minister Satsuki Katayama said at a post-cabinet meeting press conference on the 17th that 'we will take decisive steps whenever necessary', hinting at the possibility of large-scale yen-buying intervention. The deterioration of the situation in the Middle East has triggered 'crisis-driven dollar buying', which is a factor behind the yen's weakness. 6