[2026/10/23] Market Review: From a 1,445-yen morning plunge to a 1,230-yen dramatic reversal; the truth behind the full recovery of semiconductors and concerns over AI funding

* (Disclaimer) This report is for informational analysis purposes only; please make investment decisions at your own risk.

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1. Opening/Overview

The Japanese stock market on October 23, 2026, experienced extremely high volatility, characterized by a dramatic V-shaped recovery from a morning plunge triggered by the previous day’s decline in U.S. stocks. The Nikkei Stock Average was sold down by as much as 1,445 yen in the morning session (reaching a low of 61,462.61 yen), falling significantly below the psychological threshold of 62,000 yen. However, in the afternoon, a surge of dip-buying and short-covering flowed in, driving a recovery of over 1,230 yen from the low.

Behind this violent price action lies a fierce conflict between macro risk-off pressure—specifically a ‘bottleneck in funding’ within the U.S. AI and semiconductor ecosystem—and micro-level structural buying interest focused on the fundamentals of major stocks that had shed their overheating. Although the closing price (down 214.68 yen from the previous day) showed a slight continued decline on the surface, the momentum behind the index’s recovery was highly localized, and the internal structure of the market is undergoing intense polarization by sector and stock, along with distortions in supply and demand. This session represents a strategically critical turning point that goes beyond a mere day of turbulence, symbolizing a changing of the guard in the market and a qualitative shift in risk factors.

Summary of Key Figures

• Nikkei Stock Average Closing Price: 62,693.16 yen (-214.68 yen / -0.34% from the previous business day)

• Opening Price: 62,667.05 yen (-240.79 yen)

• Low (Morning Session): 61,462.61 yen (-1,445.23 yen)

• High (Late Session): 62,786.89 yen (-120.95 yen)

• Recovery from Low: 1,230.55 yen (Intraday range: 1,324.28 yen)

• TOPIX Closing Price: 3,965.81 (-31.69 / -0.79%)

• NT Ratio: 15.81 (+0.07pt / +0.44%)

• TSE Prime Trading Value: 8.9383 trillion yen (+26.6% from the previous business day)

• TSE Prime Trading Volume: 2.884 billion shares (+31.6% from the previous business day)

Analysis of the 4 Major Factors That Defined the Market

1. Structural Analysis of ‘Weak Open, Strong Close’ Following the shock in the U.S. market where the Philadelphia Semiconductor Index (SOX) fell 6.73%, the Tokyo market was hit by intense panic selling in the morning, centered on major high-priced semiconductor stocks. Although Advantest plunged to a low of -7.23% and Tokyo Electron to a low of -6.88% at the start, buying accelerated in the afternoon, triggered by a rebound in U.S. stock index futures in after-hours trading and a stabilization of the South Korean KOSPI. Advantest, which had dragged the index down by 293.42 yen at the morning close, recovered sharply to a slight decline (-0.09%) by the market close, marking a complete change in market sentiment between the morning and afternoon sessions.

2. Shift in the Downward Pressure Axis (From Semiconductor Manufacturing Equipment to Electronic Components) While semiconductor manufacturing equipment stocks showed an astonishing full recovery, the electronic components sector remained a burden on the market. TDK (-5.61%), which was the top contributor to the Nikkei’s decline, accounted for 36.7% (-78.88 yen) of the total decline on its own, and together with second-place Nitto Denko (-3.80%), they pushed the index down by 47.8% (-102.65 yen) of the total. TDK’s intraday high never exceeded the previous day’s closing price, indicating a structural change where the ripple effects of AI investment concerns have shifted from ‘manufacturing equipment’ to ‘general-purpose components and electronic parts’.

3. Interest rate decline and sector rotation The domestic long-term interest rate (10-year JGB yield) fell to 2.808%, marking the sixth consecutive day of decline, which sharpened the contrast between sectors. While interest rate-sensitive sectors benefited from the decline in valuation, such as Real Estate (+2.05%) and the TSE REIT Index (+1.01%), as well as domestic demand and consumer-related stocks led by Fast Retailing (+1.58%, contributing +95.47 yen to the index alone), the Banking sector (-2.28%) sank to the bottom of the decliners due to concerns over margin compression, resulting in a clear rotation driven by interest rate trends.

4. Expansion in trading volume and divergence in warning indicators Trading value on the TSE Prime Market surged to 8.9383 trillion yen, the second-highest level after October 15 (10.1 trillion yen). The fact that trading volume exploded on a day when the decline narrowed to one-eighth of the previous day’s (-214.68 yen) speaks to the reality of the turmoil, where morning panic selling and afternoon dip-buying clashed intensely. Meanwhile, the Nikkei VI (Volatility Index) jumped to 38.25 (+2.28), reaching its highest level since July 30, confirming that derivative market participants have dramatically raised their outlook for future volatility, in contrast to the bottoming out of the cash index.

To objectively grasp the structural changes in the overall market and its current position, we will verify the correlations and figures of key indicators in detail in the next chapter, “Detailed Data Dashboard.”

2. Market Key Indicators Dashboard

In a market where the macroeconomic environment and market sentiment are rapidly intersecting, it is essential to comprehensively compare and verify not only major stock indices but also foreign exchange, domestic and foreign interest rates, commodities, and volatility indicators derived from derivatives.

Analyst Key Takeaways (3 Major Structural Changes to Watch)

1. Divergence between the “surface” and “substance” of the index: The Nikkei 225 (-0.34%) fell less than the TOPIX (-0.79%), and the ratio of rising stocks on the Prime Market fell to 36.7%. The recovery of the index was led only by a few high-priced stocks, with over 60% of all stocks declining.

2. Rebound in the volatility index: Despite the 1,230-yen bottoming out of the cash index, the Nikkei VI rose to 38.25. The intensity of the intraday range (1,324 yen) has amplified expectations for future fluctuations, and hedge demand remains high in the derivatives market.

3. Immediate rotation following interest rate trends: The decline in the domestic 10-year bond yield (2.808%) immediately boosted the Growth 250 (+0.18%), TSE REIT (+1.01%), and Real Estate (+2.05%) sectors, while directly hitting the Banking sector (-2.28%).

Analysis of divergence between indices

In today’s market, a clear divergence in strength occurred between the Nikkei 225 (-0.34%) and the TOPIX (-0.79%). This is due to the weighting structure of both indices and the bias in the afternoon recovery process. High-priced tech stocks with high contributions to the Nikkei 225, such as Advantest, Tokyo Electron, and SoftBank Group, rebounded sharply from their opening and low levels in the afternoon, fully recovering to near the previous day’s closing price, which strongly supported the Nikkei 225. In contrast, heavy industry and financial sectors that account for a large proportion of the TOPIX, such as Banking (-2.28%), Shipping (-2.10%), and Non-ferrous Metals (-1.76%), remained sluggish throughout, resulting in a lackluster recovery for the TOPIX. As a result, the NT ratio rose 0.07 points from the previous day’s 15.74 to 15.81, turning to expansion for the first time in 5 business days.

In the emerging and interest-rate-sensitive markets, the TSE Growth Market 250 Index finished in positive territory at +0.18%, the only major stock index to do so, while the TSE REIT Index also rose for the third consecutive day, up +1.01%. The structural factor behind the resilience of these sectors is that the domestic 10-year JGB yield fell for the sixth consecutive day to 2.808% (-0.063% pt from the same time the previous day). Although the September national core CPI (+2.1%) accelerated, bond buying (lower interest rates) due to risk aversion in the stock market took precedence, and funds flowed into emerging growth stocks and REITs with high dividend yields, for which lower interest rates are a positive factor in terms of valuation.

Based on the changes in the macro structure presented by the indicator groups, the next chapter will dissect the specific time-series price movements during trading hours and the underlying deep-seated factors in the US market.

3. The Full Picture of Price Movements and US Factors

The drama of the intense shock and V-shaped recovery in today’s Tokyo market was directly spread and triggered by the sharp decline in the AI and high-tech sectors in the US market the previous day, and the subsequent trends in after-hours trading.

It was index futures (Nikkei 225 Large Futures) that bottomed out ahead of the cash market. Futures hit a low of 61,630 yen in night trading, and the low in the daytime session (61,630 yen) also stopped falling at a level 167.39 yen above the low of the cash market (61,462.61 yen). The fact that futures solidified their lows in advance and developed a bottom-up trend toward the afternoon session became the fuse that strongly triggered short covering and algorithmic dip-buying in the cash market.

Deep analysis of the US market plunge

In the US market the previous day, the background to the sharp decline in the Nasdaq Composite (-2.60%) and the SOX Index (-6.73%) was the emergence of a new risk scenario: “concerns over funding and working capital bottlenecks in the AI infrastructure ecosystem,” which goes a step further than the “heaviness of AI capital expenditure (CapEx)” that has been discussed previously.

• Meta Platforms’ FCF deficit In Meta’s July-September earnings, free cash flow (FCF) saw an outflow (deficit) of $2.12 billion. This is the first negative figure since its listing in 2012, and the reason is that capital expenditure ($33.94 billion) reached 104% of operating cash flow ($32.79 billion). The capital expenditure outlook for the full year 2026 was also revised upward to $135 billion to $145 billion, and the company’s stock plunged by as much as 8% (closing down -6.98%) due to caution over the funding burden associated with massive investments.

• Nvidia CEO’s remarks and the neo-cloud funding bottleneck Nvidia’s CEO stated, “Demand for emerging clouds (neo-clouds) is expanding rapidly, but the current bottleneck is working capital, and the demand for capital far exceeds supply.” Although the content pointed to capital constraints rather than the disappearance of demand itself, the market interpreted this as a “risk of funding bottlenecks in the AI ecosystem,” which became a factor for selling off semiconductor-related stocks all at once, including CoreWeave (-10.06%), Lam Research (-11.76%), and Applied Materials (-8.16%).

The trigger for the Tokyo market’s afternoon recovery

The trigger that changed the tide from the desperate morning sell-off to the afternoon session was the rebound in U.S. stock index futures during off-hours trading (as of 17:30, CFD Nasdaq 100 was +0.45% at 29,088.50) and the bottoming out and rebound of the South Korean KOSPI in the Asian market. Confirming the calm in U.S. off-hours trading induced short-covering by domestic institutional investors and short-term momentum players like CTAs, as well as dip-buying aimed at an autonomous rebound.

Behind the fierce V-shaped recovery of the overall index was a ‘sharp polarization by individual stocks and sectors.’ In Chapter 4, we will examine that micro-structure in detail.

4. Polarization by individual stocks and sectors

The surface figure of the Nikkei 225 closing price (-214.68 yen) masks the reality of the market. Internally, while semiconductor manufacturing equipment stocks that were sold at the opening achieved a full recovery, electronic component stocks continued to stall, and a contrasting dark turn and sudden rise between sectors occurred due to falling interest rates.

Contrast analysis of semiconductors vs. electronic components

The biggest highlight in today’s individual stock trends is the striking contrast between the astonishing ‘full recovery’ of semiconductor manufacturing equipment stocks and the ‘sluggish rebound’ of electronic component stocks.

The three stocks of Advantest, Tokyo Electron, and SoftBank Group were sold down by 7-8% in the morning session, and as of the midday close, they had pushed the Nikkei 225 down by a total of -683.18 yen. However, intense buying entered toward the afternoon, and by the closing bell, they had surged from near flat compared to the previous day to positive territory.

On the other hand, TDK (-5.61%) in the electronic components sector could not even surpass its previous day’s closing price (2,780.5 yen) at its intraday high (2,680 yen), and it ended the afternoon session with an extremely sluggish rebound. The downward contribution of the five electronic component stocks, including Nitto Denko (-3.80%), Kyocera (-1.73%), Murata Manufacturing (-2.44%), and Ibiden (-1.00%), reached a total of -143.40 yen, accounting for approximately 67% (66.8%) of the Nikkei 225’s total decline.

Behind this divergence lies a structural fault in the supply chain. Because direct capital expenditure (CapEx) on AI infrastructure by hyperscalers (Big Tech) remains robust, the demand outlook for ‘manufacturing equipment’ (Advantest, Tokyo Electron, etc.) in the front-end and back-end processes has not collapsed. In contrast, concerns stemming from the deteriorating financial conditions of Neo-Cloud and others have intensified fears that the inventory digestion cycle for terminal and server components will be delayed in ‘general-purpose parts and electronic components’ (TDK, Murata, etc.), which dampened the momentum of the rebound.

Verification of top and bottom Nikkei 225 contributors

* Other top contributors to the rise included Mercari (+7.33%, contribution +8.53 yen, based on the announcement of the provision and collaboration of U.S. Meta’s AI agent ‘Muse’ in Japan), Ryohin Keikaku (+2.57%, +7.96 yen), and Aeon (+4.51%, +5.16 yen), which are domestic demand and earnings-related stocks.

* The total contribution of the top 10 downward-pushing stocks was -230.91 yen, exceeding the actual decline of the Nikkei 225 (-214.68 yen). Manufacturing equipment (Advantest, etc.), which was the center of the downward pressure the previous day, was removed, and electronic component-related stocks led the decline.

• A case of conflict between good earnings and bad market conditions: Trends in Fanuc (6954) Today, the stock price movement of Fanuc (Nikkei 225 constituent weight 1.52%), which announced its second-quarter earnings, clearly shows the conflict between micro-positive factors and macro-risk-off. The company’s consolidated recurring profit for the April-September period increased by 38.1% year-on-year (149 billion yen), and it upwardly revised its full-year recurring profit forecast by 13.9% from the previous 271.2 billion yen to 308.8 billion yen (an increase of 35.7% compared to the previous term). Following this, it showed a rebound to close at its high of 5,587 yen from an intraday low of 5,322 yen, but it was pushed down by the pressure of the entire sector, remaining at a slight decline of -0.66% (-37 yen) compared to the previous day. This is a symbolic case of today’s market environment, where it ‘showed extremely strong standalone fundamentals but was offset by the deterioration of the overall sector’s market conditions and turned to the downward side.’

Sector-specific rate of change and the light and shadow of ‘falling interest rates’

Of the 33 Tokyo Stock Exchange sectors, only 8 sectors rose, while 25 sectors fell, highlighting the lack of market breadth.

• Top gainer ‘Real Estate (+2.05%)’ vs. top loser ‘Banking (-2.28%)’ Following the 10-year Japanese government bond yield falling for the sixth consecutive business day to 2.808%, the banking sector (-2.28%) became the top decliner due to concerns over narrowing interest margins. In contrast, the real estate sector (+2.05%), which benefited from lower funding costs and a recovery in REIT prices (TSE REIT Index +1.01%), became the top gainer, clearly showing a symmetrical reaction to falling interest rates.

• Divergence in non-ferrous metals (-1.76%) Despite the LME copper price rebounding by +1.00% ($14,228) in the commodity market, the TSE non-ferrous metals sector showed a contrary decline of -1.76% (3rd largest decline). This is because non-ferrous metal stocks, which include electric wires and electronic materials, are moving more strongly reflecting the ‘view of slowing demand for AI and data centers’ than mere metal market conditions.

To uncover the truth behind the polarization in the cash market, Chapter 5 will analyze the supply and demand structure of the derivatives market.

5. Supply and demand/derivatives analysis

Behind the dramatic bottom-rebound in the cash market, the derivative supply-demand structure—including futures trading patterns, option positions, arbitrage trading, and equity options (Kabu-Ops)—functioned in a complex manner.

• Note on analytical perspectives in derivative analysis Since the daily trading data and option volume published by JPX record “both the seller and buyer in equal numbers,” it is impossible to definitively determine the direction of trades (whether they are sell or buy open interest) from the data alone. The trading pattern analysis in this chapter constructs professional hypothetical considerations implied by price changes and session-specific characteristics, based on the published definitive facts (volume, open interest, strike prices).

Futures trading volume and player trading pattern analysis

In today’s index futures market, trading volume increased across all four major products, and the total trading value swelled to 14.3411 trillion yen (+21.7% from the previous business day).

It is notable that the trading value of TOPIX futures surged by +52.0% (3.4944 trillion yen) compared to the previous day. Looking at the session composition, while the “night session” accounted for 40.6% (398,843 contracts) of Nikkei 225 mini trading following the U.S. plunge, trading for large and TOPIX futures concentrated (approximately 45-48%) in the “afternoon session,” where buying back from the lows progressed.

Regarding major player trading patterns, Société Générale Securities returned to the top spot in Nikkei 225 futures (large) with 23,351 contracts (estimated volume 11,676 contracts) (a 4.36x increase from the previous day’s 5,360 contracts). Barclays Securities ranked in the top tier for all products, including large (18,833 contracts, 2nd), mini (358,743 contracts, 2nd), and TOPIX futures (44,124 contracts, 1st), confirming an expansion in active liquidity provision and cover trading by overseas aggregators.

Nikkei 225 option volume analysis (November 2026 expiry)

From the major trading patterns (total 3,852 contracts) of the Nikkei 225 options for the day (November 2026 expiry, 15 business days until SQ), the risk levels monitored by large participants can be inferred.

• P63,000 (ITM level): Total 678 contracts (ABN Clearing 270, JP Morgan 150, Susquehanna 150, etc.). As this was a large-scale trade at a level already ITM, it is inferred to be a move to close out existing positions.

• P62,000 (OTM level): Total 284 contracts (ABN Clearing 226, UBS 30, etc.). At the psychological level of 62,000 yen, this was a point where buying for downside hedging and selling aimed at supporting the floor (defensive wall) intersected.

• C62,750 / P62,750 (Straddle/Synthetic position): JP Morgan Securities and BNP Paribas Securities executed J-NET trades for the same number of calls and puts (30 each) at the same strike price (62,750 yen). This suggests either a volatility play (long straddle) pivoting at 62,750 yen or the construction of a synthetic futures position to lock in directionality.

Interpretation of arbitrage trading balance, short-selling ratio, and sentiment

In the arbitrage trading balance (T+2 data) published today as of October 21, arbitrage long positions increased to 844.521 million shares (+35.839 million shares), marking the first increase in 4 business days. At the same time, arbitrage short positions decreased to 8.033 million shares (-4.662 million shares, -36.7%), the first decrease in 4 business days. It was revealed that the supply-demand tightening, where futures were bought against cash, had occurred, reversing the arbitrage unwinding of “decreasing long positions and increasing short positions” seen until the previous day.

Meanwhile, today’s short-selling ratio fell to **39.6% (-3.6pt from the previous day)**. Both “with price restrictions,” indicating institutional investor hedging, fell to 31.3% (-2.9pt), and “without price restrictions” fell to 8.3% (-0.7pt). The decline in the short-selling ratio amid a surge in trading value to 8.9 trillion yen is perfectly consistent with the fact that short covering at low levels and cash buying led the trading. However, the rise in the Nikkei VI (38.25) indicates that the intense intraday amplitude (1,324 yen range) itself boosted expectations for future volatility.

Equity options (Kabu-Ops) and ToSTNeT large-scale trades

Total trading volume for equity options swelled to 52,232 contracts (+57.1% from the previous day), the highest level in October. In terms of composition, the put ratio became 53.0% (compared to 17.9% the previous day), reversing to put-dominance for the first time in 3 business days. In addition to a large trade of 20,000 contracts in the November expiry 420 yen put for the TOPIX-linked ETF (1306), significant open interest was also seen in the November expiry 3,600 yen call (12,040 contracts) for the Nikkei High Dividend 50 ETF (1489). For individual stocks, put trades presumed to be for downside hedging were prominent, such as the November expiry 650 yen put for Nippon Steel (5401) (3,000 contracts), the November expiry 3,400 yen/December expiry 3,600 yen put for SoftBank Group (9984) (total 801 contracts), and the November expiry 4,700 yen put for Fanuc (6954) (400 contracts).

In ToSTNeT large-scale trades (executed on October 22, 5 billion yen or more), the following 3 transactions (total approx. 21.9 billion yen) were executed.

1. Mitsui Fudosan (8801): Executed at 17:09, approx. 8.97 billion yen (5,825,400 shares, 1,539.7 yen). This was a precursor large-scale movement before the real estate sector became the top performer (+2.05%) on the 23rd.

2. Sony Group (6758): Executed at 15:31, approx. 6.71 billion yen (1,643,000 shares, 4,080.9838 yen). The stock remained firm on the 23rd, up +1.37%.

3. Mitsui O.S.K. Lines (9104): Executed at 08:30, approx. 6.22 billion yen (872,400 shares, 7,133.0 yen). The shipping sector fell -2.10% on the 23rd.

Based on supply-demand analysis, we will organize the “major events and issues for next week” that the market is focusing on.

6. Three major issues for next week

After a turbulent week, the market is heading into a “decisive battle” next week (the last week of October), where some of the year’s largest macro and micro events will be concentrated.

Issue 1: The direction of concerns regarding “funding and bottlenecks” in AI infrastructure

The biggest focus will be on what views and outlooks companies can provide through their earnings announcements regarding the “concerns over AI investment funding bottlenecks” that erupted following Meta’s FCF deficit and the Nvidia CEO’s remarks. Next week, earnings will be released simultaneously for companies with extremely high index contribution to the Tokyo market: Advantest (announcing 10/28, 11.50% contribution), Tokyo Electron (announcing 10/30, 7.95% contribution), TDK (announcing 10/30, 2.27% contribution), and **Kioxia HD (announcing 10/30, 1.48% contribution)**. In the U.S., Big Tech companies including Microsoft, Alphabet (10/28), Amazon.com (10/29), and Apple (11/2) will also announce their earnings. What the market fears is “a reduction in capital expenditure plans and a deterioration in capital efficiency.” Whether major companies can reaffirm strong order backlogs and CapEx outlooks holds the key to a full-scale bottoming out of tech stocks as a whole.

Issue 2: Central bank monetary policy meetings (FOMC & BOJ meeting)

Policy decisions by both the U.S. and Japanese central banks are coming up one after another.

• U.S. FOMC (held 10/28-29, results announced 10/29 at 3:00 JST, Fed Chair Warsh press conference at 3:30) Attention is focused on the judgment regarding the current policy interest rate (upper limit 4.00% / lower limit 3.75%) and Chair Warsh’s remarks on the terminal rate. As the U.S. 10-year Treasury yield falls toward 4.982% and breaks below 5%, whether a hawkish stance is maintained will shake the currency and interest rate markets.

• Bank of Japan Monetary Policy Meeting (held 10/30, results and Outlook Report announced around noon, Governor Ueda press conference at 15:30) Following the September national CPI (core CPI accelerated to +2.1% year-on-year), the future rate hike path for the current 1.25% policy rate is in question. How the distortion caused by the domestic 10-year bond yield (2.808%) continuing to fall due to stock risk aversion is corrected by the BOJ’s Outlook Report and Governor Ueda’s press conference will influence the valuation of bank stocks (-2.28%) and real estate stocks (+2.05%).

Issue 3: Divergence between expanding trading volume and market breadth (soundness of supply and demand)

While trading value swelled to 8.9 trillion yen, the advance-decline ratio on the Prime Market remained at 36.7% (8 sectors up, 25 sectors down). This was a localized recovery dependent on a few high-priced semiconductor stocks and Fast Retailing, and the breadth of the overall market has not expanded. We must verify the soundness of supply and demand through the published arbitrage balance data: whether the arbitrage buying balance that rebounded as of October 21 (844.52 million shares) headed toward liquidation again in the October 22 data (published 10/26) when the market fell 1,713 yen, and in today’s data (published 10/27), or whether it accumulated due to dip buying.

We will present the conclusions of our analysis and practical insights for this turbulent market in the next chapter.

7. Summary

Reconfirming the 10-business-day trend and determining the market position

Tracing the trend over the past 10 business days (October 9 to October 23), the Nikkei Stock Average has been forced into an extremely significant adjustment of **-6,348.95 yen (-9.20%)** in total. Compared to the TOPIX (-3.07%) over the same period, it highlights how rapid the collapse led by high-priced tech stocks has been.

A fact that must be faced squarely is that although there was a V-shaped recovery today, the closing price of 62,693.16 yen closed 32.84 yen below the September 14 low (62,726 yen), which was considered a support level on the previous business day. Also, the intraday low of 61,462.61 yen is the lowest level since July 31, and the risk of further technical testing of the downside has not disappeared.

Analyst Key Takeaways (3 major structural changes to watch)

1. The strange structure of “high volume x narrow gains”: On a day when trading volume swelled to 8.9 trillion yen (+26.6%), the advance-decline ratio plummeted to 36.7%. This is the result of “intermingled panic selling and localized buybacks,” and does not mean that the overall market supply and demand have improved.

2. Shift in market concerns regarding funding bottlenecks: The material has shifted from a contraction in AI demand itself to a funding issue of “neo-cloud operating capital and FCF deficits.” The full recovery of equipment stocks and the stagnation of component (electronic parts) stocks demonstrate this selection.

3. Clear sector reversal and surge due to falling interest rates: With the decline in JGB yields (2.808%), the adjustment in the banking sector (-2.28%) deepened, while the real estate sector (+2.05%) and J-REITs (+1.01%) emerged as safe havens for capital.

Final insights that individual investors and practitioners must grasp

1. Do not be misled by the illusion of a ‘1,230-yen bottom-out rebound’ While the recovery of over 1,230 yen from the morning lows provides a strong sense of relief, the reality of the overall market is that only 36.7% of stocks rose, with 25 sectors declining, and the index was supported only by a few high-priced stocks like Advantest and Fast Retailing. It is extremely dangerous to overconfidently assume that overall market sentiment has improved, and priority should be given to the volatility warnings indicated by the Nikkei VI (38.25).

2. Thoroughly differentiate between ‘manufacturing equipment’ and ‘electronic components’ While Advantest and Tokyo Electron achieved a full recovery from their lows, electronic component stocks such as TDK (-5.61%) and Murata Manufacturing (-2.44%) remained sluggish throughout the day. Recognize that concerns over AI investment are shifting from ‘direct CapEx demand’ to ‘component inventory adjustments due to working capital bottlenecks,’ and it is essential to strictly assess orders and outlooks in next week’s earnings announcements (Advantest on 10/28, Tokyo Electron and TDK on 10/30).

3. Flexible response to sector rotation accompanying falling interest rates As domestic long-term interest rates continue to fall to 2.808%, the shift of funds from bank stocks (-2.28%) to real estate stocks (+2.05%), REITs (+1.01%), and consumer defensive stocks is becoming clear. However, risk management that always accounts for the risk of a sudden reversal in interest rate trends depending on the policy decisions at the Bank of Japan meeting (Outlook Report and Governor Ueda’s press conference) on October 30 and the FOMC (Chair Warsh’s press conference) on October 29 is required.