Tokyo Stocks Surge as Bond Auction Eases Rate Fears

Tokyo stocks surged on October 6, with the Nikkei 225 closing above 70,000 for the first time in three months, driven by strong gains in artificial intelligence and semiconductor-related shares. The Nikkei 225 gained 737 points, or 1.05%, to 70,684, while the broader TOPIX rose 0.92% to 4,183.56. The rally was supported by a strong session for U.S. technology stocks, with the Nasdaq Composite reaching a record high overnight, boosting Japanese semiconductor shares.

Key contributors to the rally included Advantest, which gained about 3.9%, and Fujikura, which rose more than 5%. SoftBank Group, however, dropped about 3.1%, despite the broader enthusiasm surrounding AI-related investments. The rally was broad-based, with about 30 of the Tokyo Stock Exchange's 33 industry groups advancing, and more than 1,150 Prime Market stocks finishing higher.

A major turning point came from the government bond market, where demand at an auction of 10-year Japanese government bonds was stronger than expected, easing fears about investor reluctance to absorb new government debt. The yield on the benchmark new 10-year JGB remained around 3.105%. Prime Minister Sanae Takaichi reassured investors by pledging to maintain fiscal sustainability while pursuing growth-oriented fiscal spending.

Bank of Japan Governor Kazuo Ueda emphasized the importance of anchoring underlying inflation around the central bank's 2% target, noting that Japan's economy was recovering moderately. He warned that inflation could overshoot due to higher raw material costs, strong AI-related demand, geopolitical risks, and the weak yen. The yen remained relatively weak, trading around 158.07 yen to the dollar. Lower oil prices also provided a positive factor for Japanese shares, easing pressure on corporate costs and household inflation.