SoftBank Rises with Tech Stocks Amid Easing Rate Hike Fears

SoftBank's stock jumped over 5% in Tokyo on Friday as technology shares rallied amid easing fears of another US interest-rate increase. This surge helped propel the Nikkei 225 index up by 1.8% to 69,523.56.

The move followed softer-than-expected US producer-price data, which reduced the likelihood of a Federal Reserve rate hike in September to around 35%. Easier US interest-rate expectations can be beneficial for SoftBank's valuation, particularly given its significant exposure to AI assets such as Arm and OpenAI.

However, investors are also becoming increasingly confident that the Bank of Japan will raise its policy rate again in September. This would create currency risk due to a strengthening yen, which could potentially offset some of the benefits from easier US interest rates.

Masayoshi Son's concentration on AI has increased SoftBank's sensitivity to global technology sentiment and made it more reliant on these assets for its value. As its net asset value (NAV) jumped significantly in recent months, investors are now becoming more cautious about a potential reversal in either elevated technology prices or the weak yen.

Deutsche Bank analyst Peter Milliken has warned that investors may be vulnerable to such a reversal, citing both elevated technology prices and the weak yen as potential risks. Market participants, including former Japanese currency diplomat Mitsuhiro Furusawa, now largely expect the BOJ to increase its policy rate in September.