Sharp Sell-Off In Global AI Stocks Dragged Down Japan's Nikkei 225 by 5%

Akira Ito
05 Nov, 2025
Tokyo

Japan's benchmark indexes plunged as much as 5% following steep losses in tech stocks in New York in overnight trading. 

The Nikkei 225 Stock Average dropped nearly 5%, and the broader Topix declined nearly 2% before recovering from the worst losses of the session. 

In overnight trading, the S&P 500 index closed down 1.1%, and the Nasdaq Composite dropped 2% amid worries about sky-high valuations of mega-cap tech stocks. 

Those worries boomeranged across Asia, and markets in Shanghai, Hong Kong, Tokyo, and Seoul dropped between 1% and 4%. 

Investors are increasingly preparing for the U.S. benchmark indexes to ease 15% from record highs, as circular AI trade lifted a select list of tech stocks from the lows in early April.  

Despite receding trade tensions between the U.S. and China, investors are concerned that relations between the two countries are likely to remain volatile. 

Moreover, Japan's new prime minister Sanae Takaichi's support of the ultra-loose monetary policy may support higher inflation for longer.

Japan is facing renewed pressure from the Trump administration to sharply increase its defense spending and lower its reliance on the U.S., as the world's largest economy investigates how to lower its global defense commitments. 

The Japanese yen weakened to 153.47 against the U.S. dollar amid expectations that the Bank of Japan is likely to leave its key short-term rates unrevised at the last policy meeting of 2025 in December. 

 

Japan Indexes and Stocks 

The Nikkei 225 Stock Average plunged 3% to 49,925.47, and the broader Topix fell 1.7% to 3,253.89. 

Softbank Group plunged 9.8% to ¥22,850.0, Tokyo Electron Ltd. decreased 3.8% to ¥33,460.0, and Advantest Corp. dropped 6.9% to ¥20,280.0. 

Mitsubishi UFJ Financial Group decreased 2.2% to ¥2,278.0, Sumitomo Mitsui Financial Group eased 1.8% to ¥4,077.0, and Mizuho Financial Group fell 2.2% to ¥4,990.0.