Tokyo Stocks Open Sharply Lower Amid U.S. Tech Selloff

Tokyo stocks opened sharply lower on January 28, 2023, with the market facing significant pressure from technology shares. The decline in the Tokyo market followed a steep drop in the U.S. Nasdaq index, which raised concerns among investors regarding the tech sector.

The Nikkei Stock Average fell by 548.93 points, equivalent to a 1.39 percent drop, to close at 39,016.87. Meanwhile, the broader Topix index decreased by 1.17 points, or 0.04 percent, finishing at 2,756.90.

Impact on Technology Sector

Leading the decline in Tokyo were selling pressures on technology and semiconductor-related shares. Concerns intensified after a Chinese startup developed a low-cost AI model, which challenged the positions of established U.S. companies in the semiconductor market. This development contributed to fears that demand for semiconductors could weaken, particularly those used in artificial intelligence applications.

On the Prime Market, companies in nonferrous metals, glass, ceramics, and electric appliances were prominent among the decliners as investors reacted to the negative sentiment surrounding tech stocks. The heavy selloff sent the Nikkei index dipping more than 600 points at one point during the day.

Market Conditions and Currency Movements

In Tokyo, the U.S. dollar rose slightly to the upper 155 yen range, driven by speculation that inflation in the United States may increase again. This speculation was fueled by statements from President Donald Trump regarding potential tariffs on semiconductor and pharmaceutical imports, which could have significant implications for international trade.

As of 5 p.m., the dollar stood at 155.84-87 yen compared to 154.47-57 yen in New York and 155.86-89 yen at the previous day's close in Tokyo. The euro was trading at $1.0434-0435 and 162.62-66 yen.

Outlook on Semiconductor Demand

The ongoing selling of chip-related stocks might slow down if investors gain confidence that the new Chinese AI model will not disrupt the dominance of U.S. companies in the artificial intelligence sector. Market analysts suggest that tech shares will likely remain vulnerable to further declines while there are uncertainties about the competitive landscape in AI.

Despite the overall negative trend, certain sectors showed resilience. For instance, shares of banks performed well as investors leaned towards them in anticipation of improved profits following the recent interest rate hike by the Bank of Japan.

Overall, the market's immediate future will depend significantly on how companies in the tech sector can respond to the challenges posed by emerging competitors and how global economic conditions evolve.

Tokyo, Stocks, Technology