BOJ Rate Hike Fears Weigh on SoftBank Amid Technology Rally

SoftBank Group saw its shares jump over 5% in Tokyo on Friday as technology stocks rallied following softer-than-expected US producer-price data. This reduced the likelihood of a Federal Reserve rate increase in September to around 35%. The Nikkei 225 index rose 1.8% to 69,523.56.

SoftBank's valuation has become closely tied to its AI assets, including Arm and OpenAI. Easier US rate expectations are supportive for the company, but investors are also growing more confident that the Bank of Japan will tighten again in September, creating currency risk. SoftBank's sensitivity to global technology sentiment has increased as Masayoshi Son concentrated the group around AI.

SoftBank's net asset value jumped from about ¥40 trillion at the end of March to ¥72.3 trillion at the end of June, helped by gains in Arm and Intel. However, July's market correction pushed NAV back towards ¥58.3 trillion by August 5, showing how quickly paper wealth can move when technology valuations turn.

Deutsche Bank analyst Peter Milliken has warned that investors are 'vulnerable to a reversal' in either elevated technology prices or the weak yen after SoftBank's enormous run. Markets now see a 76% probability of a September BOJ rate hike, up from 24% on July 30.