Executive Summary
On June 4, 2026, the Nikkei 225 declined from its all-time high, falling roughly 1.5-1.9% to trade near 67,000. The pullback followed a strong June 3 session in which the index first surpassed 68,000, buoyed by Wall Street records and AI-related demand. Renewed US-Iran tensions weighed on sentiment, pushing energy prices higher and prompting caution in rate-sensitive sectors.
Session Drivers
- Escalating US-Iran hostilities undermined hopes for a peace agreement and lifted oil prices.
- Weak outlook from US chipmaker Broadcom pressured global technology equities.
- Japanese tech names followed US futures lower amid broader risk-off moves.
- Investor focus remained on inflation and interest-rate implications from higher energy costs.
Sectors & Breadth
Technology and AI-related shares led the session's declines, with notable drops in SoftBank Group, Kioxia Holdings, and Murata Manufacturing. The semiconductor equipment and electronics supply chain, which had powered the prior rally, reversed sharply. Broader participation appeared limited as defensive or less-exposed areas showed relative resilience, suggesting the move was concentrated rather than market-wide.
What to Watch
- Developments in US-Iran relations and any impact on crude oil prices.
- Upcoming US economic data releases and corporate earnings, particularly in the technology sector.
- Bank of Japan policy signals and yen exchange rate movements around 160 per US dollar.
- Foreign investor positioning and any shifts in passive equity inflows.
Capital-Flow Context
The recent advance to record levels reflected sustained interest in Japan's semiconductor supply chain amid global AI spending, amplified by a weaker yen that boosted exporter revenues. Foreign investors have been net buyers during the multi-month rally, while domestic corporate buybacks and governance reforms continued to support valuations. Any sustained geopolitical risk could prompt a reassessment of positioning, particularly in export-oriented and tech-heavy segments.