Nikkei Falls 0.73% as Early Rally Above 67,000 Fades on Chip Profit-Taking, Ending Five-Day Winning Streak

TOKYO — Japan's benchmark Nikkei 225 fell 0.73% to 65,877.62 on Monday, shedding 486.59 points, as an early surge above 67,000 faded into profit-taking in chip and artificial intelligence shares, ending a five-session winning streak on the last day for investors to qualify for interim dividends.

The index opened higher at 66,506, helped by a strong lead from Wall Street, lower crude oil prices and softer U.S. long-term yields, according to News On Japan. Early buying in semiconductor and AI-related shares pushed the Nikkei as high as 67,035, briefly reclaiming the 67,000 level. The strength did not last. The index was still marginally higher at about 10:18 a.m., at 66,404.70, according to Yahoo Finance. Buying eased once it had climbed more than 600 points above Friday's close, and profit-taking spread through the semiconductor group, pulling the benchmark below Friday's level.

The broader market also slipped, showing the weakness was not confined to the price-weighted Nikkei. The TOPIX index fell 16.59 points to 4,112.00, and the Growth Market 250 Index dropped 9.08 points to 791.47, as smaller growth stocks remained vulnerable to higher yields and profit-taking, News On Japan reported. Investing.com's session summary said falling stocks outnumbered advancers on the Tokyo Stock Exchange by 2,116 to 1,401, with 243 unchanged.

Monday's decline followed a strong run. The Nikkei closed at 66,364 on Friday, up 850 points, its fifth consecutive gain, as chip shares and dividend-paying financial stocks rallied, according to News On Japan. That recovery had followed a mid-September sell-off that took the index toward 63,484, IBTimes Australia reported. On September 18, the day the Bank of Japan raised its policy rate, the index closed at 65,018.95, so Monday's close remains higher than that level. It is still about 9% below its record close of 72,366.34 on June 25, based on figures in the IBTimes Australia analysis.

The calendar added to the volatility. Investors who wanted to receive interim dividends or shareholder benefits from many companies with September 30 record dates had to hold shares through Monday's close, making it an important deadline for banks, insurers, trading houses and other high-dividend names, News On Japan said. A market commentary from Investinglive noted on Friday that dividend-driven buying has a set expiry, because shares typically go ex-dividend once the deadline passes and lose that support. Banks and insurers continued to draw buying even as the broader index fell. Mizuho Financial Group rose 2.01% to ¥8,799, a five-year high, and Dai-ichi Life Holdings gained 1.91% to ¥1,943.50, according to Investing.com.

Nervousness showed up in options pricing. The Nikkei Stock Average Volatility Index, a gauge of implied volatility, was at 28.05 by about 11:14 a.m., up 7.75 points or 38%, according to Nikkei's index site. At about the same time, the Nikkei Semiconductor Stock Index was down 0.51%.

Among individual stocks, chip-linked names led the losses. Socionext fell 5.15% to ¥2,128.50, Ibiden dropped 4.43% to ¥22,310 and memory chipmaker Kioxia Holdings lost 4.37% to ¥53,340, Investing.com reported. Ebara rose 2.82% to ¥4,565. SoftBank Group, which News On Japan described as Tokyo's most visible proxy for global AI investment because of its exposure to OpenAI and Arm, also gained, but its rise was not enough to keep the broader index positive.

The index's construction magnifies these swings. The Nikkei is a price-weighted average, so a handful of high-priced technology stocks carry outsized influence. IBTimes Australia reported that Advantest was the largest weight at about 11.9% as of the September 18 close, followed by Tokyo Electron at about 8.2% and SoftBank Group at about 7.8%, and that technology stocks made up more than 56% of the index. News On Japan noted that Tokyo Electron and Advantest are highly sensitive to global AI sentiment, U.S. technology shares and bond yields, and that the AI trade remains powerful but unstable, with investors paying closer attention to valuations.

The macro backdrop remains a focus. Japan's benchmark long-term interest rate climbed to 3.115% during trading, its highest level in nearly 30 years for a second consecutive day, as of Friday's session, reflecting persistent inflation concerns and expectations of further rate increases, News On Japan reported. The yen was hovering near 158 to the dollar late last week, which News On Japan called the most important domestic signal, noting that further weakness toward 160 would help exporters but revive inflation and intervention concerns. The outlet also said uncertainty over the Bank of Japan's next move has lingered.

Overseas, Wall Street ended last week higher, with the S&P 500 up 0.51%, the Dow Jones Industrial Average up 0.93% and the Nasdaq up 0.48%, and crude oil down about 2.3% to around $92.41 a barrel, according to market data. Investors are also watching Friday's U.S. nonfarm payrolls report, which is expected to show roughly 80,000 jobs added in September with unemployment holding at 4.1%, ABC News reported.

None of the coverage reviewed included direct comments from analysts about Monday's session, so this report relies on the published market data. Traders are likely to watch whether the Nikkei can regain the 66,000 level once the dividend-related demand fades, and whether TOPIX and financial shares continue to participate in the rally rather than leaving it dependent on a narrow group of chip stocks. This article is a report on market developments and is not investment advice.