Historical record high! Post-holiday buying frenzy sweeps through Japan: Nikkei 225 soars 3400 points, breaking through the 62,000 level for the first time!

After a long holiday break in the Japanese stock market, on May 7th (Thursday), a "leap to catch up with global gains" frenzy took place. The Nikkei 225 index closed at 62,915.87 points at midday, soaring by 3,402 points, an increase of 5.7%. This was the first time in history that it surpassed the 62,000-point mark, reaching as high as 62,958.0 points at one point, setting consecutive record highs. The TOPIX index also rose by 3.4%, closing at 3,847.15 points. Year-to-date, the Nikkei 225 index has accumulated a gain of about 25%, performing outstandingly among major global indices. "During the Golden Week holiday break, global risk assets continued to rise, and today's market essentially represents the Nikkei index completing three days' worth of trading in one trading day," noted Billy Leung, an investment strategist at Global X ETFs. "The S&P 500 and NASDAQ indices both hit new all-time highs during the Japanese market closure, with semiconductor and AI sectors leading the surge." Three key drivers behind the significant rise are the AI revolution, geopolitical developments, and policy support. The surge in the Japanese stock market after the four-day closure was fueled by an accumulation of positive factors. During the Golden Week holiday, Wall Street tech stocks surged, progress was made in US-Iran talks, and oil prices fell sharply, creating a snowball effect as delayed funds rushed into the market on May 7. In terms of sector performance, out of the 225 stocks in the Nikkei index, 144 rose and 78 fell, with the largest gains seen in the technology supply chain sector: Ibiden, a major packaging substrate manufacturer, surged 15.9%, followed by Mitsubishi Metals at 17%, Renesas Electronics at 12.8%, SoftBank Group hitting its limit-up at 18%, Tokyo Electron rising nearly 9%, Advantest rising about 8%, and Rohm Semiconductor climbing almost 7%. The first driving force behind the surge is the demand for AI computing power leading to a "paradigm revolution." The assets leading the surge are closely linked to the AI computing power supply chain. AMD's impressive first-quarter report sparked a reevaluation of the entire semiconductor front-end supply chain. As the demand for AI workloads shifts from "large model training" to "intelligent entity inference," the ratio of CPU to GPU is evolving from traditional 1:4 or 1:8 towards close to 1:1 or even more in favor of CPUs. AMD has correspondingly raised its target market size for server CPUs to over $1.2 trillion by 2030, with a compound annual growth rate of over 35%. This assessment has immediately raised the value reevaluation of the entire semiconductor front-end supply chain. As the most liquid Japanese targets in the AI semiconductor trade, Advantest and Tokyo Electron have become crucial entry points for global funds. Arm revealed on the same day that its in-house data center AI chip (AGI CPU) is expected to generate orders of $2 billion in the fiscal year 2027-2028, further confirming that the data center CPU is becoming the next bottleneck in AI infrastructure. SoftBank Group's surge mirrors this narrative - currently holding about 13% of OpenAI's shares (worth about $64.6 billion), it is seen as a substitute target for OpenAI and Arm's listing in Japan. This year, the total AI spending in the artificial intelligence field by Alphabet, Amazon, Microsoft, and Meta Platforms is expected to exceed $700 billion. The news of the joint venture between SoftBank and OpenAI receiving unconditional approval from the European Commission adds a layer of policy certainty to this narrative. The second driving force behind the surge is the sudden warming of tensions into a possible US-Iran ceasefire. On May 6, the White House sent out multiple optimistic signals: President Trump announced on social media that the US had engaged in "very productive" talks with Iran over the past 24 hours and a deal was "highly likely." Reports from various media outlets revealed that the US and Iran are close to reaching a "14-point, one-page memorandum" that includes declarations to end the current conflict, to start 30-day follow-up talks, to gradually reopen the Strait of Hormuz, for the US to lift sanctions on Iran, and to release frozen Iranian assets. On the same day, the Iranian Foreign Ministry confirmed that they were "evaluating" the US proposal, with Trump estimating the timeframe for reaching an agreement to be "a week" in an interview. The day before, Trump had announced the suspension of the "Free Plan" escort for commercial ships through the Strait of Hormuz, and Iran's ports and maritime organization subsequently announced on May 7 a full resumption of maritime services and technical support at all ports. Brent crude oil plummeted by 7% in the previous trading day, significantly easing global concerns about sustained energy cost impacts. Takamasa Ikeda, a senior portfolio manager at GCI Asset Management, remarked, "The Nikkei index surged today mainly driven by the strong performance of semiconductor stocks, which in turn benefited from AMD's strong performance outlook. While the specific details of the US-Iran peace plan are not yet clear, the market generally expects that there will not be any further military actions." The third driving force behind the surge is the clarity emerging in the Bank of Japan's interest rate hike roadmap. The minutes from the Bank of Japan's March meeting released on May 7 showed that committee members unanimously agreed that interest rates should continue to be raised based on the improvement in the economy and prices. One member even explicitly stated that "policy rates are far from a neutral level" and failure to act promptly may force the central bank to adopt "rapid and substantial monetary tightening measures" in the future. The yen was trading around 156.25 during the session. Hiroyuki Ueno, chief strategist at Mitsubishi UFJ Trust and Asset Management, pointed out that the market has gradually absorbed expectations for the Bank of Japan to maintain a gradual interest rate hike path, which is the core logic behind the strength seen in the financial sector on the same day (Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group both rose by about 3%). Meanwhile, after recent speculation in the market about multiple interventions by the Japanese government to push for a stronger yen, analysts believe that the pressure for the Bank of Japan to raise interest rates has alleviated. The Nikkei 225 index surpassing 62,000 points for the first time was the result of a convergence of three key driving forces - the AI paradigm revolution, geopolitical shifts, and holiday momentum. However, it is worth noting that these three major drivers all possess significant unsustainable features: once the US-Iran ceasefire memorandum is finalized, market optimism may see a temporary "point of bullish exhaustion," detailed terms of the accord and its implementation mechanisms will face repeated tests in the upcoming 30-day negotiations; while the logic behind the CPU demand reassessment driven by AMD is robust, the actual capacity release and sustained digestion capability of the global chip supply chain still require validation through real financial reports; the 5.7% surge in a single trading day was more of a technical fund replenishment, and its sustainability depends on further coordination with the global macro environment. Moreover, while the outside world views this market surge as a "widespread celebration," there are clear signs of divergence within the Nikkei 225 index. Resource stocks are under pressure and strongly declining: Japan's largest oil exploration company Inpex fell by 6.5%, with the mining sector as a whole trending downwards. Expectations of eased tensions in the Middle East are constraining oil prices and commodity prices, leading to systematic withdrawal of funds from energy assets that previously profited from geopolitical conflicts. The automotive sector is also showing overall weakness: Honda Motor fell by 0.7%, further expanding its cumulative decline since the beginning of the year. Intensifying global competition and continued deterioration in the Chinese market are compounding factors, as Honda had previously issued its first annual loss warning in nearly 70 years. This structural headwind is far from dissipating.