The Nikkei 225 rose 2.9%, the TOPIX index fell 0.9%, and the NT ratio reached 16.70
Index gains were concentrated in semiconductor stocks, while most sectors and megacaps declined

The Nikkei 225 rose from 66,364.20 to 68,309.46, a gain of 1,945 points (+2.9%), while the TOPIX index fell from 4,128.59 to 4,091.00 (−0.9%) (Nikkei, Sep 25 close; Nikkei, Oct 2 close). The 3.8-point gap lifted the NT ratio from 16.07 to 16.70.

The gains came on September 30 and October 1. On September 30 the Nikkei rose 1,272 points (+1.9%) following firmer US semiconductor stocks. Early on October 1, Micron Technology reported June–August quarterly revenue of $54.2bn and guided to about $61.5bn for the following quarter, both above consensus (Micron release). The Nikkei rose 2,203 points (+3.3%) that day while TOPIX gained only 0.6% (Zaikei). Advantest rose about 9.8% and on its own added more than 700 points to the Nikkei (OANDA). Over the week Advantest rose 13.6%, Tokyo Electron 7.0% and Fast Retailing 4.6%.

Market breadth was weak. On October 2 the Nikkei fell 647 points and 84.1% of Prime Market stocks declined (Zaikei). September 29 was the ex-dividend date for interim dividends of March year-end companies, which reduced the Nikkei by about 380 points (Zaikei); TOPIX fell 1.72% that day (Nikkei). Because the Nikkei is price-weighted, high-priced semiconductor stocks carry far more weight than their share of TOPIX market capitalisation, and the Nikkei's gain this week overstates the performance of the broader market.

The BOJ's September Tankan, released on October 1, showed the large-manufacturer business conditions index rising from +22 in June to +24, a sixth consecutive quarterly improvement, slightly below the consensus of +25. The large non-manufacturer index fell from +37 to +35. Firms forecast +21 and +30 respectively for December. Large companies plan fiscal 2026 capital spending growth of 11.3%, and the all-enterprise exchange-rate assumption moved to ¥154.23 per dollar from ¥152.57 in June (BOJ Tankan summary; OANDA). Tokyo core CPI for September, released on October 2, rose 2.7% year on year against a consensus of 2.4%, the first reading above 2% in eight months (Nikkei).

JGB yields moved little (MOF data to October 1). The 2-year yield reached 1.981% on September 28, which Nikkei described as the highest in about 31 years (Nikkei), then eased to end the week 0.9bp lower at 1.939%; the 10-year yield rose 2.1bp to 3.092%. The 10-year Treasury yield rose 7bp to 5.24% (FRED, October 1), widening the US–Japan 10-year spread from 210bp to 215bp.

Despite the wider spread, the yen firmed. USD/JPY fell from 158.81 to 157.93, a 0.6% yen gain; the yen also rose 1.7% against the euro. According to Nikkei, Fed Vice Chair Jefferson said on October 1 that the next policy adjustment may take a little more time, which reduced expectations of a near-term Fed hike, while the firmer Tokyo CPI supported expectations of further BOJ tightening. The BOJ's Summary of Opinions from the September meeting, released on October 1, included the view that upside risks to prices warrant more attention than downside risks to activity (BOJ). The yen's move this week appears to reflect shifts in policy expectations in both countries rather than the level of the spread (inference).

Only five of the TOPIX-17 sector ETFs rose. Steel and nonferrous gained 6.1%, electric and precision 3.4% and machinery 1.4%; energy resources fell 4.2%, pharmaceuticals 3.7%, real estate 3.4%, transport and logistics 3.4%, and autos and transport equipment 2.7%. On October 2 only four of the 33 TSE sectors rose (nonferrous metals, mining, oil and coal products, and shipping), as higher crude oil prices were seen as a burden on earnings and interest rates for the rest (TBL). Among megacaps, MUFG (−4.6%), Toyota (−4.4%), Mitsubishi Corp. (−3.4%) and Mitsui & Co. (−3.3%) were the weakest; these unadjusted price changes include the September 29 ex-dividend drop.

The latest JPX investor-type data cover September 24–25 (two trading days); this week's figures have not yet been published. Foreign investors were net sellers of ¥93.0bn, a third consecutive week of net selling, consistent with Kabutan's report (Kabutan). Trust banks sold a net ¥367.3bn; business companies sold a net ¥134.0bn, their first net sale in the six weeks shown; individuals sold a net ¥8.6bn.

Among TOPIX-17 sectors, steel and nonferrous (+6.1%), electric and precision (+3.4%) and machinery (+1.4%) led, with raw materials and chemicals (+0.7%) and construction and materials (+0.0%) slightly higher. Energy resources (−4.2%), pharmaceuticals (−3.7%), real estate (−3.4%), transport and logistics (−3.4%) and autos and transport equipment (−2.7%) were the weakest; banks fell 1.4%.

Of the 13 megacaps, seven rose and six fell. Advantest and Tokyo Electron are up 96.7% and 76.3% year to date; Nintendo is down 25.9% and Toyota 14.9%. The Nikkei 225 is up 35.7% year to date against 20.2% for the TOPIX 1306 ETF.

TOPIX measure: the 1306 ETF in the table was flat this week (−0.02%), while the TOPIX index fell 0.91%. The gap arose mainly on the September 29 ex-dividend date, when the TOPIX index fell 1.72% and the 1306 ETF 0.65%. The ETF's net asset value includes dividends receivable and does not fall with its constituents on the ex-date (inference), so this week the TOPIX, JPX-Nikkei 400, Growth 250 and sector ETFs all show higher returns than the corresponding price indices. TOPIX levels and changes in the text use the JPX index close; tables and charts use ETF prices.

The JGB curve steepened slightly. The 2-year and 5-year yields fell 0.9bp and 1.6bp, the 10-year and 20-year rose 2.1bp and 2.7bp, and the 30-year rose 1.0bp. The 2-year yield peaked at 1.981% on September 28 before easing; the 10-year closed at 3.092%, 103bp above the end of last year. The Ministry of Finance has not yet published October 2 data, so the table runs to October 1.

The US–Japan 10-year spread widened from 210bp to 215bp, yet the yen rose slightly against the dollar, the euro and the renminbi. The Nikkei Volatility Index rose from 20.30 to 22.58, after reaching 27.74 on September 29. The BOJ next meets on October 29–30 and the Fed on October 27–28; US CPI and Japanese price data released before then are likely to shape rate expectations in both countries and the yen (inference).

JPX usually publishes data for this week (September 28–October 2) on the fourth business day of the following week (October 8), so the latest week here is September 24–25 (two trading days). Over the six weeks shown, foreign investors were net sellers in five, for cumulative net selling of ¥919.6bn. Trust banks were net sellers in all six weeks, totalling ¥2.36trn, which may reflect pension rebalancing after equity gains (inference). Individuals were cumulative net buyers of ¥709.1bn. Business companies were cumulative net buyers of ¥767.9bn but turned net sellers of ¥134.0bn in the week of September 24–25, possibly reflecting position adjustments ahead of the interim ex-dividend date (inference).

Mitsui & Co. fell 3.3% this week, 6.3 points behind the Nikkei 225; Mitsubishi Corp. fell 3.4% and the trading companies and wholesale sector ETF 2.1%. September 29 was the interim ex-dividend date, and Mitsui fell 3.8% that day; the weekly change uses unadjusted prices and includes the ex-dividend effect. Year to date Mitsui is up 5.6% and Mitsubishi Corp. 30.9%. Our rating on Mitsui is Neutral; see the report.