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In September, Japanese equities delivered mixed performance amid rising geopolitical tensions in the Middle East, higher global bond yields and evolving monetary policy expectations. The Nikkei 225 outperformed, gaining 0.7%, while the broader TOPIX declined 1.1%, supported by a recovery in AI and semiconductor-related stocks despite weakness across much of the market. Early-month sentiment weakened as escalating regional conflict drove oil prices higher, inflation concerns intensified and the yen strengthened. Markets subsequently recovered as AI-related shares rebounded and pressure from energy prices and currency movements eased, before trading largely sideways towards month-end.

In August, Japanese equities advanced as the TOPIX rose 3.8%, marking a fifth consecutive monthly gain, while the Nikkei 225 increased 3.0%, supported by strong domestic corporate earnings and easing concerns over excessive AI investment following US technology sector results. Semiconductor and AI-related stocks rebounded after July's sharp correction, while softer US economic data reduced expectations of near-term Federal Reserve tightening and further supported sentiment.

[External Link] Katsunori Ogawa, Chief Portfolio Manager for Sakigake High Alpha at SuMi TRUST AM, shared his views with WealthBriefing on the long-term outlook for AI investment, highlighting that infrastructure capacity, energy efficiency, and power management are likely to become increasingly important as AI adoption accelerates.