Japan’s Nikkei share average jumped 6% on Tuesday, marking a strong rebound after hitting a 1.5-year low just a day earlier. Investors rushed to scoop up oversold stocks, encouraged by positive cues from Wall Street and optimism around a potential market recovery.
The broader Topix index also surged over 6%, closing at 2,432.02, reflecting widespread buying across sectors.
What Drove the Rally?
According to Takamasa Ikeda, Senior Portfolio Manager at GCI Asset Management, Investors bought back stocks as they thought the shares were oversold. They saw signs of a market recovery as U.S. stock futures rose in Japan trade.
The U.S. markets played a major role in shaping investor sentiment. On Monday, while the S&P 500 and Dow Jones closed lower after a volatile session, the Nasdaq managed slight gains. More importantly, the U.S. semiconductor index jumped 2.7%, and futures of the S&P and Nasdaq rose over 1% in Asian trading on Tuesday, sending bullish signals to global markets.
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Concerns Still Linger
Despite today’s relief rally, both Nikkei and Topix remain down nearly 13% from their levels prior to the U.S. Liberation Day tariff announcement made by President Donald Trump. The new tariffs have raised concerns about their potential impact on Japan’s export-driven economy.
In a phone call with Trump, Japanese Prime Minister Shigeru Ishiba expressed disappointment with the trade developments, underlining ongoing geopolitical and economic tensions.
What This Means for Investors
Short-term recovery signals may bring back optimism, especially for tech and export-heavy sectors.
However, global uncertainties and trade tensions still pose risks to sustained growth.
