Japan's stock market experienced a notable downturn as investors locked in profits following recent gains. The Nikkei share average fell 1.35% to close at 48,641.61, marking its second consecutive session of losses.

Market Overview

The broader Topix index also declined, dropping 0.39% to 3,253.78. This pullback comes after the Nikkei reached a record intraday high of 49,945.95 recently.

Sector Performance

Technology Sector Hit

The technology sector led the decline, with several key players experiencing significant drops:

The downturn in tech stocks was further exacerbated by reports of potential U.S. export restrictions to China involving American software.

Defense Sector Surge

In contrast to the overall market trend, defense-related shares saw substantial gains:

These gains are attributed to expectations of increased defense spending.

Market Outlook

While the market has taken a step back, the mixed sector performance suggests that investors are recalibrating their positions in light of recent developments. Market participants will continue to assess various factors that may influence trade, defense, and economic cooperation in Japan.

Japan's Nikkei share average took a step back on Friday, closing 0.9% lower at 48,117.92 points. The decline comes on the heels of a robust 5% rally earlier in the week, as investors opted to secure profits ahead of a three-day weekend. The broader Topix index experienced a steeper fall, dropping 1.62% to 3,205.05.

Market Movers

The day's trading saw mixed performances across various sectors:

Fast Retailing's Strong Performance

Fast Retailing, the parent company of Uniqlo, stood out as a bright spot in the market:

• Reported record-high profit for the year ended August
• Forecasted a fifth consecutive year of record profit in fiscal 2026
• Aggressive expansion plans in North America and Europe

Political Landscape and Market Sentiment

The week's earlier gains were largely driven by speculation surrounding potential changes in Japan's political leadership:

• Expectations rose that Sanae Takaichi could become the next prime minister
• Hopes for fiscal stimulus and continuation of loose monetary policy
• Growing concerns about Takaichi's ability to secure coalition partners for implementing spending plans

Market Outlook

As the Japanese market heads into a three-day weekend, investors seem to be taking a cautious approach. The profit-taking observed today suggests a reevaluation of positions after the recent rally. The mixed performance across sectors, with technology and financial services facing pressure while retail shows resilience, indicates a nuanced market environment.

Investors will likely keep a close eye on political developments and their potential impact on fiscal and monetary policies. The performance of global chip-related stocks and the broader technology sector may also influence market sentiment in the coming sessions.