[Recap] Japan Market, Week of 8/24-8/28: Nikkei Rebounds +274 on the 28th and Ends the Week in the Green — Fed’s Hawkish New Chair Warsh in Focus Next Week

Hey everyone, Hirokichi here.

Let’s recap Japan’s stock market for the week of August 24-28. The Nikkei 225 fell nearly 500 points at one point this week, but it managed to close the week in positive territory. Between all the back-and-forth headlines around semiconductor stocks, what stood out to me was how resilient the market felt — dips kept attracting buyers. That said, the swings were sizable, and there’s plenty for us to carry into next week too. Let’s go through it day by day.

This week’s Nikkei 225 moves at a glance

Here’s the week’s move in one chart. Starting from the previous Friday’s (8/21) close of 66,016 yen, the index dropped as low as down 488 points on Monday, then clawed back for two straight days on Tuesday and Wednesday, dipped again on Thursday, and finally closed Friday (8/28) up 274 points at 66,406 yen. What this chart tells me is that dip-buying kept coming in, and the market stayed relatively resilient on the way down. Comparing the week’s open and close, the Nikkei ended up about 390 points higher (+0.6%).

Monday: down 488 points as US-Japan yields rise and chip stocks slide

The Nikkei fell for a second straight day on August 24, closing down 488 points from the previous Friday at 65,528 yen. Long-term interest rates rose in both the US and Japan, and weakness in South Korean shares added to the pressure, triggering heavy selling in high-weight semiconductor names. Advantest and SoftBank Group alone dragged the index down by roughly 560 points. When rates rise, growth stocks like semiconductors — whose value depends heavily on discounting future profits back to the present — tend to look relatively expensive, which makes them an easy target for outflows. Trading value fell below 8 trillion yen for the first time in three and a half months, a sign of just how cautious investors had become. TOPIX, meanwhile, stayed in positive territory, with money flowing into value names like bank stocks. It was a classic split session: high-weight growth names down, but the broader market holding up.

Tuesday-Wednesday: a sharp reversal, financials lead a two-day rally

On Tuesday the 25th, the Philadelphia Semiconductor Index (SOX) had dropped 3.93% overnight, and the Nikkei briefly fell as much as 918 points at the open. But with Nvidia’s earnings due later in the week (early morning Japan time on the 27th), a “let’s wait and see” mentality brought in bargain hunters, and the index actually closed up 328 points at 65,856 yen — its first gain in three sessions. The rally continued the next day, the 26th, with the Nikkei up 405 points to 66,261 yen. Financial stocks led the buying, though trading value stayed at a four-month low, and a cautious undertone persisted — the sense that “even if earnings season stays strong, September could bring some turbulence.”

Nvidia’s earnings, released that evening US time (early morning of the 27th in Japan), showed revenue up 106% year-over-year to roughly 15.3 trillion yen — a blowout quarter. For more on how the US market reacted, check out this recap of the US stock market.

Thursday: Nikkei falls 130 points despite Nvidia’s strong earnings

Even after clearing the big Nvidia earnings event, the Nikkei fell 130 points on the 27th to 66,132 yen, snapping its three-day winning streak. The earnings themselves were strong, but the market also picked up on worries that rising memory chip prices could squeeze costs and margins, and that weighed on semiconductor materials and equipment names like SUMCO. Global demand for chips remains solid, but this new cost concern seems to have been enough to trigger some profit-taking. Meanwhile, individual names that posted strong results kept attracting buyers, which kept the overall decline modest. Even a major event like Nvidia’s earnings didn’t fully clear the air — attention quickly shifted to the next worry (memory costs), which says something about how fast-moving this market has become.

Friday (8/28): Nikkei rebounds +274, ending the week in the green

And on the final trading day of the week, the Nikkei rebounded, closing up 274 points at 66,406 yen. Strong earnings from Salesforce in the US lifted SaaS and software-related names, and the Growth 250 index for emerging companies jumped 3.2%. Early in the afternoon session, the Nikkei was up more than 700 points at one point, but it lost some steam and pared its gains into the close — likely in part because investors were reluctant to push too hard ahead of the Jackson Hole speech I’ll get to below. Still, the close on the 28th was positive, and for the week overall, the Nikkei finished up about 390 points (+0.6%) from the prior Friday. It was a genuinely choppy week, but the fact that dips kept getting bought is an encouraging sign heading into next week.

Next week’s outlook: Fed Chair Warsh’s hawkish turn and the August jobs report

There’s one thing we can’t ignore heading into next week: the Jackson Hole speech delivered by Fed Chair Kevin Warsh on the 28th (late evening to early morning of the 29th, Japan time). Warsh said, “If we’re not confident that underlying inflation is moving toward our objective, clearly and at a sufficient pace, then we have work to do” — a comment that flipped market expectations away from the previously dominant rate-cut narrative and toward the possibility of a September rate hike. According to CME’s FedWatch tool, the probability of a September hike jumped from 35% before the speech to 59% afterward. The dollar reportedly strengthened to around 162 yen on the news, and it’s worth remembering that Friday’s Nikkei close of 66,406 yen doesn’t yet fully reflect this speech, since it came after Tokyo’s market had closed. Given that the previous chair, Jerome Powell, was seen as leaning toward rate cuts, this sudden hawkish pivot came as a real surprise to the market. I’ve written up the details in this article.

For Japanese stocks next week, the first question will be how the market digests this “hawkish surprise.” A weaker yen would be a tailwind for exporters like automakers, but rising rates tend to be a headwind for high-multiple growth and semiconductor names, so expect some choppiness. The biggest event on the calendar is the US August jobs report, due Friday, September 4. After July’s jobs report, the Nikkei jumped over 1,000 points in a single session, so the market consensus seems to be that this report could move the index sharply in either direction. The base case is for a range-bound market until the jobs data comes out, but with plenty of money still looking for a home, dips are likely to keep finding buyers. Personally, whichever way the yen or rates move, I don’t plan to trade more actively out of excitement or worry — I’ll stick with my regular contributions and long-term holdings, and try to stay calm through what could be another volatile week.

* This article is for informational purposes only and does not recommend any specific investment. Please make investment decisions at your own responsibility.

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