Nikkei Climbs as Yen Strengthens, Exporters Face Pressure

The Nikkei 225 rebounded 0.86% to 64,769.74 by the midday break on Friday, driven by a surge in technology shares even as the yen strengthened to about ¥155.7 per dollar. The index snapped a four-session slide but remained down roughly 2.7% for the week. SoftBank Group climbed more than 10% and added about 414 points to the Nikkei’s 555-point advance at the midday break. Fast Retailing and Kioxia were also among the largest positive contributors.

Investor sentiment shifted after remarks from Federal Reserve Governor Christopher Waller noting signs of disinflation and indicating he could support leaving rates unchanged in September if that trend continues. Markets cut the implied probability of a September rate increase to about 50% from roughly 63% the previous day. US Treasury yields fell, with the two-year near 4.34% and the 10-year around 4.76%, easing some valuation pressure on growth and technology stocks.

Regional markets rose alongside Tokyo. The MSCI Asia-Pacific index outside Japan gained about 1%, China’s CSI 300 added 1%, and South Korea’s Kospi increased by 1.1%. The advance in Tokyo was narrow: more stocks on the Tokyo Prime market were falling than rising at midday, indicating the rebound was concentrated in a few large-cap tech names rather than a broad market rally.

Currency movements remain a headwind for exporters. The yen strengthened roughly 2.6% over the week to near ¥155.7/$, close to levels seen after joint intervention in July. A stronger yen lowers the yen value of overseas earnings when converted back into yen and can reduce reported profits for exporters. MUFG strategist Michael Wan noted the currency firmed from around ¥160 to about ¥155.30 within two sessions. Japan’s current-account data did not provide a clear signal of further intervention.

JPMorgan Private Bank strategist Yuxuan Tang projects the Bank of Japan could raise rates three to four times over the coming year, potentially taking the policy rate toward 2%, a view some investors are incorporating when assessing yen direction and equity risk.

Market participants flagged upcoming US jobs and inflation reports as key to the Federal Reserve’s September decision. Economists forecast US nonfarm payrolls to rise by about 56,000 after a 23,000 decline the prior month, with the unemployment rate expected to hold at 4.1%. For Tokyo equities, the balance between lower US yields and a stronger yen will affect near-term moves, and investors will watch corporate earnings and any Bank of Japan signals on policy.

Fed Governor Christopher Waller commented, “Recent data show signs of disinflation,” adding he could support a pause in September if the trend persists.