Japan’s stock market Nikkei 225 is bleeding red as the market slid more than 2% as AI-linked tech shares sold off on Friday, July 24, 2026, even as fresh data showed inflation still stuck below the Bank of Japan’s 2% target. At the same time, Asia-wide risk-off sentiment and a brutal drop in South Korea’s Kospi added extra pressure to Japanese equities.
Nikkei Takes a 2%+ Hit
Japan’s Nikkei 225 index fell 1,811 points to close at 64,611.15, a drop of about 2.73% in a single session as per Google Finance. This is a big drop for a big index, and this drop has wiped out tens of trillions of yen in paper value from the stock market in one shot. Even though the exact “30 trillion yen” figure is still an estimate that is based on overall market capitalization.
The broader Topix index also slid, closing down about 1.05% at 4,011.31, showing that the weakness was not limited to a handful of large names. Despite today’s slump, the Nikkei still managed to finish the week up around 0.7% after a sharp 6.4% fall the previous week. This drop just shows how volatile the Japanese equities were this month.
AI Hype Hangover Hits Tech
The immediate spark for the sell-off was not coming from Tokyo but it was from Silicon Valley. A sharp 7% plunge in Alphabet shares in the U.S., after the company signaled higher spending and negative cash flow tied to AI investments, rattled global tech sentiment. Investors are suddenly asking a hard question: is this AI spending binge actually sustainable, or are we staring at an “AI bubble” that is getting overbuilt?
Japanese strategists are blunt about it. Kazuaki Shimada of IwaiCosmo Securities noted that the Nikkei’s slide is being driven by overseas factors. “The (Nikkei) index is affected by overseas factors rather than local factors. Many Japanese companies will announce financial reports starting today, and if their performance outlook is strong, the trend of the index may change.” Kazuaki Shimada said.
Chip and AI Tech Stocks Lead the Slide
In Japan, the pain was concentrated in the names most plugged into the global AI and semiconductor story. Chip-testing giant Advantest dropped about 6%, while semiconductor equipment heavyweight Tokyo Electron slid almost 5%. These companies are heavily exposed to global chip cycles, so any wobble in AI or data centre spending hits them quickly.
Tech investor SoftBank Group, often seen as a leveraged bet on future tech themes, sank a little over 7%, adding to the gloom around high-beta growth names. Memory chipmaker Kioxia was hammered as well, with its shares falling close to 9.5%, reinforcing the sense that investors are de-risking across the broader semiconductor complex.
Domestic Plays Back the Downtrend
Interestingly, not everything on the Tokyo Stock Exchange was bleeding red. Stocks tied to domestic demand and everyday Japanese activity managed to climb, acting as a partial cushion. East Japan Railway and West Japan Railway, key passenger rail operators, rose nearly 2% each, while Central Japan Railway added about 1.6%. These names benefit more from local travel and commuting trends than from global AI cycles, so they usually act as “defensive” plays when tech unwinds.
Otsuka Holdings, known for products like Pocari Sweat, gained somewhere around 2.2%, making it one of the standout winners on the Nikkei. Overall, about 40% of stocks on the Tokyo Stock Exchange’s prime market rose, 56% fell and around 3% were flat. showing that while the index headline looks ugly, the damage was not completely one-way under the surface.
Inflation Stays Sub-2%, BOJ in No Rush
Japan’s inflation data supported expectations that the Bank of Japan is unlikely to rush into further rate hikes. With core inflation at 1.6% (below its 2% target for a fifth straight month) and underlying price pressures remaining subdued, policymakers have room to stay cautious.
Asia-Side Sell-Off: Kospi in Deeper Trouble
It was not just Japan’s Nikkei that experienced a drop in the stock market. Across the Sea of Japan, South Korea’s Kospi has been hit even harder, at one point slumping around 6% as tech and chip names like Samsung and SK Hynix bore the brunt of violent de-risking from AI-linked plays. Regional commentary points to a broad rotation out of AI infrastructure names after a series of U.S. tech shocks, amplifying volatility across Asian markets.
In other words, this is not a “Japan problem”, it’s a wider Asia tech shakeout, with investors questioning just how far and how heavily they are now tilted toward semiconductors and high-growth tech.
