The Japanese stock market surged on Tuesday, recovering from the previous session's steep losses. The Nikkei 225 Index climbed well above the 38,500 level, buoyed by positive cues from Wall Street and broad-based sector gains, particularly among index heavyweights and technology stocks.
Investor sentiment was bolstered by incoming Prime Minister Shigeru Ishiba's endorsement of the Bank of Japan's intention to raise interest rates from near-zero levels. Ishiba also expressed support for potential corporate tax hikes and other economic policies.
By midday, the benchmark Nikkei 225 Index had jumped 649.65 points, or 1.71%, to 38,569.20, after briefly reaching a high of 38,621.94. This sharp rise came after Japanese shares closed significantly lower on Monday.
Key stocks led the rally: SoftBank Group gained nearly 3%, and Fast Retailing, the operator of Uniqlo, added almost 2%. In the automotive sector, Honda rose over 2% and Toyota advanced nearly 2%.
In the technology sector, Advantest increased nearly 2%, Screen Holdings advanced almost 3%, and Tokyo Electron added more than 3%. Elsewhere, banking giants Mitsubishi UFJ Financial, Sumitomo Mitsui Financial, and Mizuho Financial each gained 2.5%.
Major exporters also performed well: Canon added close to 2%, Mitsubishi Electric gained over 1%, while Panasonic and Sony edged up between 0.2% and 0.5%.
Among other notable gainers, Kawasaki Heavy Industries soared over 8% and Mitsubishi Heavy Industries surged nearly 7%. IHI and Japan Steel Works each advanced more than 7%. TDK and Ebara gained over 5%, and Fujikura and Nitto Denko added more than 4%. Nomura Holdings, Disco, Japan Exchange Group, Hitachi, and Isetan Mitsukoshi each rose almost 4%, while Socionext increased more than 3%.
There were no major laggards reported.
In economic news, Japan's unemployment rate dropped to a seasonally adjusted 2.5% in August, below the expected 2.6% and down from July’s 2.7%. The jobs-to-applicant ratio was 1.23, slightly missing the forecast of 1.24. The labor force participation rate edged up to 63.6% from 63.5% in the previous month.
A survey by Jibun Bank indicated a continued contraction in Japan's manufacturing sector in September, with the manufacturing PMI falling to 49.7 from August's 49.8, further below the 50-point threshold separating expansion from contraction.
The Bank of Japan's quarterly Tankan Survey revealed steady sentiment among large manufacturers in Q3 2024, with a diffusion index score of +13, beating expectations of +12. The outlook remained at +14. For large non-manufacturers, the index came in at +34, exceeding forecasts of +32 and up from +33 the previous quarter, though their outlook dipped to +28 from +34. Among medium manufacturers, the index was +8 with an outlook of +9, while the medium non-manufacturing index stood at +23 with an outlook of +16. The small manufacturing index was at 0, and the small non-manufacturing index was at +14.
In currency markets, the U.S. dollar traded in the higher 143 yen-range on Tuesday.
On Wall Street, stocks saw mixed movement on Monday before closing mostly higher. The Dow Jones Industrial Average inched up by 17.15 points to a record high of 42,330.15. The Nasdaq gained 69.58 points, closing at 18,189.17, and the S&P 500 rose by 24.31 points to a new record of 5,762.48.
In Europe, major markets declined. The French CAC 40 Index fell by 2.0%, the U.K.'s FTSE 100 Index dropped by 1.0%, and Germany's DAX Index slid by 0.8%.
Crude oil prices remained flat on Monday. West Texas Intermediate Crude oil futures for November settled marginally lower, down by $0.01 to $68.17 per barrel, amid concerns about oil demand from China.
