Nikkei rises to highest level since July 1990 on weak yen

Japan’s Nikkei share average rose on Monday to its highest level since July 1990, buoyed by optimism over a US debt ceiling deal and a weaker yen.

SoftBank Group jumped more than 8 per cent as shares of Japanese chip-related companies continued to outperform amid the AI euphoria that also propelled Wall Street peers.

The Nikkei surged as high as 31,560.43 within the first 10 minutes of trading, although gains were capped over the course of the day as the index closed up 1.03 per cent at 31,233.54.

SoftBank Group continued to push higher throughout the day, driven by news that British subsidiary Arm Ltd had rolled out a new chip technology that Taiwan smartphone-chip maker MediaTek will adopt in next-generation products.

Advantest, the chip-testing equipment maker that counts Nvidia Corp among its clients, climbed more than 4 per cent , taking gains over the past three sessions to nearly 26 per cent .

“The trigger for everything was Nvidia,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

The Nikkei is easily swayed by moves in the big tech stocks, relative to the Topix, and that sets the index up to outperform, he added.

The broader Topix rose as much as 1.36 per cent  to 2,175.13 in early trading but failed to get close to last week’s 33-year high at 2,188.66. It finished the day up 0.69 per cent  at 2,160.65.

Lifting the mood across the Japanese market early on, US President Joe Biden said on Sunday he had finalized a budget agreement with House Speaker Kevin McCarthy and the deal was ready to move to Congress for a vote.

Meanwhile, the yen dropped to the cusp of 141 per dollar for the first time in six months, buoying the value of overseas revenue for Japanese exporters.

Honda Motor rallied 1.28 per cent and Subaru advanced 1.67 per cent. Of the Nikkei’s 225 components, 165 rose, while 51 fell and nine were flat.

Meanwhile the benchmark Japanese government bond yields edged higher on Monday, as a weekend deal by US President Joe Biden and congressional Republican Kevin McCarthy to suspend the debt ceiling reduced demand for the safety of local government debt. The 10-year JGB yield rose 1.5 basis point (bp) to 0.43 per cent . The 20-year yield added 1 bp to 1.02 per cent . The 30-year yield was flat at 1.245 per cent , after earlier advancing 0.5 bp. Benchmark 10-year JGB futures fell 0.04 yen to 148.52.

Still, Sumitomo Mitsui Trust AM senior strategist Katsutoshi Inadome cautioned that the agreement in principle between Biden and McCarthy is by no means guaranteed to get through Congress.

“It’s not the main scenario, but if things go bad, yields are probably going to fall,” he said.

At the same time, “yen bonds haven’t really been bought because of the debt ceiling standoff, so while they’re being sold initially due to risk-on owing to an agreement, I don’t think the impact will last long,” he added.

Two-year and five-year JGBs were yet to trade, as of 0414 GMT.

US markets are closed on Monday for a holiday, and Treasuries did not trade in Tokyo.

SoftBank Group Corp cut borrowing from its main bank Mizuho Financial Group Inc by 25 per cent in the year ended March to 608.5 billion yen ($4.51 billion), a company document showed.

The tech investing conglomerate also cut borrowing from lenders including JPMorgan Chase & Co and Goldman Sachs Group Inc.

SoftBank has been moving to shore up its balance sheet after recording loss at its Vision Fund investing arm due to falling tech valuations.

SoftBank Group Corp owned chip designer Arm on Monday rolled out new technology for mobile devices and Taiwan smartphone chip maker MediaTek Inc said it will be using it for its next-generation product.

MediaTek, a longtime supplier of low- and mid-tier smart phone chips, has been pushing into the market to supply chips for premium smartphones, once dominated by rival Qualcomm Inc , which has been in a legal battle with Arm since last year over chip licensing agreements.

In Arm’s blog announcing the new products, MediaTek said the new chips will help improve the performance of its next-generation smartphones.

Shares in SoftBank, whose CEO Masayoshi Son is focused on listing Arm, closed up 8.2 per cent in Tokyo in the biggest jump in more than a year. MediaTek shares were up 1.1 per cent.

“Investors have become extremely sensitive to any news about AI or chip technology and jumped on this Arm news,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

Arm sells blueprints chip designers use to build their own hardware. It is launching Immortalis-G720, a chip for video image processing and AI applications, and the Cortex-X4, a processor that would be the brains of the mobile device at Taiwan’s Computex conference.