The Session: A Full Round Trip
Tokyo staged a clean intraday reversal on Thursday. The Nikkei 225 opened sharply lower — down nearly 1,000 yen at the worst — after Wall Street fell overnight on crude crossing $100 a barrel amid US–Iran tensions, with the S&P 500 off 0.48% at 7,636.36. Afternoon bargain-hunting then did the rest: the index snapped a two-session losing streak to finish at 65,270.95, up 128.17 yen, or 0.20%. TOPIX told the same story, shaking off heavy morning losses to end at 4,054.58, up roughly 0.31% by the 1306 ETF proxy.
The yen was the morning’s other pressure point. Comments from Bank of Japan Policy Board members that further rate hikes are needed to complete policy normalization briefly pushed the dollar to an intraday low of 153.28 yen, before officials’ reaffirmation of a measured pace cooled the yen bid. USD/JPY settled at 153.58 by the Tokyo close, barely changed on the day.
Banks Lead, Chips Split
The rate story fed straight into sector leadership. By the TOPIX-17 ETF proxies (which can deviate slightly from official sector indices), Banks rose 1.96% — 1.65 points ahead of TOPIX — with Financials ex-Banks up 1.21% and IT & Services up 1.38%. MUFG gained 1.69% to 3,662. On the other side, Steel & Nonferrous fell 2.01%, Trading & Wholesale lost 1.57%, and Construction & Materials dropped 1.44%; only 7 of 17 sectors advanced, a reminder that the headline recovery was narrower than it looked.
Semiconductors were a two-way street. Advantest jumped 3.29% to 33,920 and stood among the day’s top large-cap gainers. But Tokyo Electron never joined, closing down 1.66% at 52,810.
Among the 95 large caps we track (a fixed universe, not a full-market scan), Nidec led at +5.63% and Murata added 5.57%, with Recruit up 3.56% and Nomura up 3.09%. The loser list was concentrated in domestic names: TEPCO fell 5.01%, Nintendo dropped 4.90% on notably heavy volume at 1.8x its 20-day average, and defense-adjacent industrials IHI and Kawasaki Heavy fell 4.89% and 2.85%. Toyota rose 0.77% to 2,994 and Sony added 0.41%, while SoftBank Group closed flat at 6,810 after spending much of the day as a negative drag.
Positioning: Shorting Steady, Squeeze Costs Broad
Short selling accounted for 42.4% of TSE trading value on Thursday (32.4% under the price rule plus 10.0% unrestricted), on total turnover of JPY 9.10 trillion. That sits in the middle third of the past eight sessions’ 39.9%–44.8% range — and exactly at the eight-session average — so shorting activity was typical of that recent window, no more defensive than it has been all week. The Nikkei Volatility Index eased 1.00 point to 30.55, still elevated at the 84th percentile of the past 903 sessions.
The cost of being short is worth watching. As of Wednesday’s JSF data (Thursday’s is not yet published), 449 of 1,030 loanable issues carried gyaku-hibu premium charges — the extra daily fee short sellers pay when borrowable stock runs tight — a breadth reading of 44% that signals meaningful squeeze pressure across the market. On the same data, leveraged long demand still dwarfs the borrow: JPY 0.61 trillion in loans for margin buying versus JPY 0.20 trillion of stock lending. Single-name detail showed margin-loan balances (leveraged longs) building in Advantest (+72,300 shares) and MUFG (+77,800), while SoftBank Group saw stock-lending balances — shares borrowed for shorting — cut by 60,700 shares.
Separately, Thursday’s batch of large disclosed short positions — regulatory filings reported with a lag, describing positioning rather than today’s selling — ran to 1,023 reports across 656 issues, topped by KLab at 16.1% of shares outstanding, ReYuu Japan at 13.9%, and TOWA at 12.7%. The largest reductions versus prior filings came in WITZ (-3.67pp) and Nipro (-2.70pp).
Rates
JGB yields drifted lower into the session per Wednesday’s MOF marks: the 10-year at 2.891% (-0.5bp), the 2-year at 1.833% (-1.5bp), and the 30-year at 3.956%. With BOJ speakers keeping normalization on the table, the banks’ rally on lending-margin hopes and the long end’s calm are, for now, coexisting.
Weekly Flows
For the week of August 31–September 4 (JPX data published with a lag — these are not Thursday’s flows), foreign investors net sold JPY 0.17 trillion of TSE Prime equities and individuals net sold JPY 0.05 trillion. One caveat: MOF’s cross-border series for roughly the same week, compiled on a different reporting basis, showed foreigners as net buyers of JPY 0.69 trillion of Japanese equities — a directional disagreement that argues against reading too much into either figure alone. Margin balances (Tokyo+Nagoya, as of September 4) showed retail leverage little changed: JPY 6.48 trillion of margin buying (-0.05T w/w) against JPY 0.85 trillion of margin selling (+0.02T).
What to Watch
- Friday’s major SQ (September 11): the combined futures-and-options settlement lands with volatility still at the 84th percentile — expect positioning-driven flows into the open.
- US inflation prints: upcoming PPI and CPI releases will set the overnight tone; S&P futures were modestly higher (+0.18%) during Tokyo hours.
- BOJ communication and the yen: Thursday showed how quickly rate-hike remarks move USD/JPY around the 153 handle — and how directly that transmits to bank shares.
Disclaimer: This is an information and analysis publication, not investment advice. See our Methodology for data sources, standards, and our corrections policy.