SoftBank jumps 5.3% as Nikkei rallies on softer US PPI data

The Nikkei 225 climbed 1.8% to 69,523.56 on Friday as SoftBank Group surged 5.3% after softer US producer-price data cut the odds of a September Fed rate hike to about 35 percent.

"Investors are vulnerable to a reversal in either elevated technology prices or the weak yen," Peter Milliken, analyst at Deutsche Bank, said in June when he downgraded SoftBank to Hold after the stock's enormous run.

SoftBank's net asset value jumped from about ¥40 trillion at the end of March to ¥72.3 trillion at the end of June, helped by gains in Arm and Intel. July's correction pushed NAV back toward ¥58.3 trillion by Aug. 5. Arm shares surged more than 16 percent Thursday on the "core CPU computing power in the AI agent era" narrative, directly driving SoftBank's valuation recovery. Chip and metal sectors supported the Nikkei, with Kioxia rising 3.1 percent and Mitsui Kinzoku gaining 5.3 percent. South Korea's KOSPI opened 0.7 percent higher, extending a rare 8.42 percent single-day surge from the prior session that triggered a circuit breaker. Samsung Electronics and SK Hynix traded higher in tandem.

The BOJ raised its policy rate to 1 percent in June, and markets now price a 76 percent probability of another hike in September, up from 24 percent on July 30. A stronger yen would reduce the yen-translated value of SoftBank's dollar-denominated overseas assets and could trigger broader volatility by encouraging investors to unwind yen-funded carry trades.

The rally in Japanese equities tracked Wall Street's overnight session, where the Dow Jones Industrial Average rose 276.31 points, or 0.55 percent, to a record close of 50,285.66. The S&P 500 gained 0.17 percent, the Nasdaq Composite edged up 0.09 percent, and the Philadelphia Semiconductor Index jumped 1.28 percent. Progress in Middle East peace negotiations added to the positive backdrop across Asia-Pacific markets.

BOJ Tightening Is the Key Risk

Expectations for another BOJ increase are strengthening after yen weakness and elevated inflation. Markets now see a 76 percent probability of a September hike, according to Tokyo Tanshi, up from 24 percent on July 30. Former Japanese currency diplomat Mitsuhiro Furusawa told Reuters that most market participants now expect the BOJ to move next month. Citi analysts told the Financial Times that "more hawkish action than previously is now clearly required" and forecast the policy rate reaching 2 percent by the end of 2027. Goldman Sachs has said risks are skewed toward an earlier rate increase.

Higher Japanese rates can strengthen the yen by narrowing the yield gap with the US. A stronger yen reduces the yen-translated value of dollar-denominated overseas assets and removes part of the currency tailwind that helped SoftBank during the yen's decline. A rapidly rising yen could also trigger broader volatility by encouraging investors to unwind yen-funded carry trades, where cheap Japanese borrowing finances investments in higher-return assets abroad.

SoftBank's AI Concentration Cuts Both Ways

SoftBank's sensitivity to global technology sentiment has increased as Masayoshi Son concentrated the group around AI. Lower US rate expectations can support expensive technology assets, improving the backdrop for businesses that make up a larger share of SoftBank's portfolio. Arm remains central to the AI chip ecosystem, OpenAI represents one of Son's largest bets, and the group is committing billions more to data centers and AI infrastructure.

But those exposures make the stock unusually sensitive to technology valuations and foreign exchange. That does not mean one BOJ hike would end SoftBank's AI rally. Its overseas holdings could appreciate to outweigh currency pressure, while a gradual yen recovery would be less disruptive than a sudden surge.

This article is for informational purposes only and does not constitute investment advice.