Tokyo Stock Market Eyes Firm Tone Amid Yen Concerns

The Tokyo stock market is expected to hold firm this week, despite lingering concerns over Japan's economic health. The Nikkei Stock Average has been showing a firm tone since late June, but selling pressure on AI and semiconductor-related stocks remains.

Recently, the Japanese government and the Bank of Japan conducted a surprise yen-buying intervention on July 30, which triggered a sharp intraday surge in the yen's value. However, the effect was short-lived, with the yen returning to its previous range of around 160 per dollar.

Nomura Securities' Yujiro Goto noted that the intervention came amid increasingly hawkish 'verbal intervention' from Finance Minister Satsuki Katayama and other officials. Despite this, the structural trend of yen depreciation remains in place, driven by the wide Japan-U.S. interest rate gap.

Rising tensions in the Middle East are also weighing on investor sentiment, with crude oil prices expected to remain high due to geopolitical risks. This is a headwind for Japan's import-dependent economy, particularly for manufacturing companies.