Chip stocks propel Nasdaq to a new high since June, Nikkei futures open higher in relay: Japanese stocks set to catch up tomorrow.

Note that Japanese stocks look poised to play catch-up with the global AI-driven rally when trading resumes on Thursday, while a weakening yen puts the risk of currency intervention back in focus. Nikkei 225 futures are already reflecting optimism toward equities, with the December contract traded in Osaka about 2.5% above the index's close last Friday. Japanese markets have been shut since then for the Silver Week holidays. The yen, meanwhile, has looked vulnerable during the break and is now heading for a fourth straight day of declines against the dollar. For bond traders, the picture is murkier, as uncertainty over the Bank of Japan's policy path offsets a potential boost from falling oil prices. The global AI trade gathered steam this week, helped by early signs of success for Meta's new AI agent and Alibaba's release of what it calls China's most powerful AI chip. Those developments helped reignite enthusiasm after recent calls by top US AI companies for a slower pace of development sparked concerns about the industry's growth. "The reheated global AI trade, a modest improvement in risk sentiment and softer oil prices leave room for Japanese equities to catch up, while also temporarily easing pressure around the inflation and rates narrative," said Hebe Chen, a market analyst at Vantage Global Prime. While a weaker yen may lift exporter shares in the short term, the risk of further intervention in the currency market will keep traders cautious, she added. The yen was around 157.88 per dollar at 6:15 p.m. in Tokyo on Wednesday. Yen weakens versus dollar after hike Chip equipment makers such as Tokyo Electron and Advantest could be among the biggest winners on Thursday, said Hu You, a senior research analyst at iFast Financial in Singapore. She also expects chip packaging substrate maker Ibiden and memory chip maker Kioxia to gain. "A semiconductor and AI-driven rally could provide a broad lift to the entire Japanese stock market," she added. On Tuesday, gains in chip stocks pushed the Nasdaq 100 to a record high for the first time since June. The Nikkei 225 rose 1.6% over the five trading days through Sept. 18, its best weekly gain in about a month. Yen and bonds The BOJ raised its benchmark rate last Friday and signaled openness to further tightening, but disappointed yen traders with a lack of clearer guidance. The yen fell as much as 1.3% to 158.05 per dollar before paring the drop later in the day, after Japanese media reported the central bank had conducted a "rate check" with market participants, a move often seen as a precursor to intervention. The selloff resumed after that, and the yen is now heading for a fourth straight decline, the longest losing streak since late August. As the yen weakens, options-market sentiment toward the currency is turning more bullish, reflecting rising demand for hedges against the risk of Japanese intervention. Bond traders, meanwhile, are getting mixed signals going into Thursday's reopening. Brent crude has fallen below $100 a barrel, and US Treasury yields have also eased this week. While that may support Japanese government bonds, uncertainty over the BOJ's tightening path could weigh on them. iFast's Hu expects short-term bonds to come under pressure. "The BOJ's rate hike establishes a higher floor for short-term rates, so it's fundamentally bearish for front-end JGB prices," she said. "The BOJ's rate hike establishes a higher floor for short-term rates, so it's fundamentally bearish for front-end JGB prices," she said. Economist Taro Kimura noted: "After the BOJ stepped up the pace of rate hikes with its latest move last Friday, Governor Kazuo Ueda was more hawkish than we expected. He said almost nothing about the weak yen. Instead, he emphasized that underlying inflation is approaching the 2% target and declared that the 'phase' of monetary policy has changed." Japanese Prime Minister Sanae Takaichi moved up her United Nations speech by two days so she could meet Trump before the US and Chinese leaders sit down. She discussed economic and security ties with the US president on Tuesday. Vantage's Hebe Chen said the short-term outlook for Japanese assets will depend heavily on how the yen trades. Further yen weakness could stoke inflation concerns and reinforce expectations for another BOJ tightening, weighing on JGBs, she said. "What is initially good for stocks may deal another round of pressure to bonds."