Nikkei Climbs 1.1% as Advantest Profit Upgrade Powers Tokyo Chip Rally Ahead of Bank of Japan Rate Decision

Japan's Nikkei share average rose for a third straight session on Thursday. Chip-testing equipment maker Advantest lifted the index after raising its profit forecast, offsetting caution ahead of the Bank of Japan's policy decision.

The Nikkei 225 closed at 64,659.47, up 705.28 points, or 1.1%. The broader Topix rose 0.3% to 4,003.28, closing back above the 4,000 level.

Advantest accounted for about two-thirds of the Nikkei's gain.

Advantest lifts forecasts

Advantest, which makes equipment used to test semiconductors, including chips for artificial intelligence, raised its full-year forecasts after the market closed on Wednesday.

The company raised its revenue forecast for the year ending March 2027 to 1.863 trillion yen from 1.714 trillion yen. That would be a 65.1% increase from the previous year. It raised its net profit forecast to 741.5 billion yen from 660 billion yen, nearly double last year's result.

Reuters reported that the company raised its annual operating profit forecast by 14%.

Advantest also announced a share buyback of up to 280 billion yen and an interim dividend of 49 yen per share.

Its shares rose as much as 9.1% during the session.

Samsung briefly rattles market

The rally was not smooth. The Nikkei briefly turned negative in the morning after Samsung Electronics shares fell in Seoul, despite record quarterly earnings, as investors judged its chip results below expectations.

Japanese chip stocks quickly recovered. Tokyo Electron rose 2.4% and SoftBank Group gained 1.8%.

Key moves on Thursday:

Nikkei 225: 64,659.47, up 1.1% Topix: 4,003.28, up 0.3% Advantest: biggest contributor, about two-thirds of the Nikkei's gain Tokyo Electron: up 2.4% SoftBank Group: up 1.8% Hitachi: down 9.8%, the Nikkei's worst performer

Hitachi slumps despite upgrade

Hitachi was the Nikkei's biggest percentage loser, falling 9.8% even though it raised its full-year profit forecast. Investors appeared unimpressed with the details of the conglomerate's results.

Market breadth was weak in the morning, when more of the Nikkei's 225 stocks fell than rose. That showed how heavily the index's gains depended on a handful of large chip-related companies.

The gap between the Nikkei and the broader Topix has been a theme this week. On Wednesday the Nikkei rose 1.08%, while the Topix fell and decliners outnumbered advancers by more than 2 to 1 on the Prime Market.

Nervous mood ahead of BOJ

Investors remained cautious ahead of the Bank of Japan's two-day policy meeting, which began Thursday. Its decision is due on Friday, Oct. 30, along with its quarterly outlook report.

"Ahead of these events, the market is perhaps showing a bit of nervousness," Maki Sawada, an equities strategist at Nomura Securities, said during the morning session. "We are possibly seeing investors taking a risk-averse stance."

Economists generally expect the central bank to keep its policy rate at about 1.25%. Some board members have recently signalled support for further tightening, and the BOJ voted 7-2 at its September meeting, with two members dissenting.

Board member Junko Koeda said in a speech this month that "the Bank should not become overly cautious about raising the policy interest rate."

Yen and bonds

The yen traded around 158 per dollar. Weakness in the yen has helped exporters but raised concern about import costs, especially with oil prices high.

Japan's 10-year government bond yield was around 2.83% earlier in the week.

Earnings season in full swing

Hundreds of Japanese companies are reporting results on Thursday and Friday, adding to volatility in individual stocks.

Investors are also watching Nidec, which missed an Oct. 28 deadline to submit corrected financial reports with an auditor's opinion amid an accounting investigation. The company plans to submit an internal controls report to the Tokyo Stock Exchange on Oct. 30.

Global backdrop

Overseas, the U.S. Federal Reserve held its benchmark rate steady at 3.75% to 4% on Wednesday. Wall Street closed slightly higher.

Results from Microsoft and Alphabet after the U.S. close produced mixed signals for technology stocks, which have driven much of the global equity rally this year.

The Nikkei's next test comes Friday with the BOJ decision and Governor Kazuo Ueda's news conference. Investors will watch for any signal on the timing of the next rate hike.