Japan's Stock Market Takes a Big Hit After Tech Selloff and Middle East Tensions

Japan's main stock index, the Nikkei 225, had one of its worst days of the year on Friday, July 17. The index dropped 4.03 percent, closing at 64,141.12. Investors were scared off by falling technology stocks around the world and rising tensions in the Middle East. The selloff pushed the Nikkei into what experts call "correction territory," meaning it has fallen more than 10 percent from its highest point.

The Nikkei had hit an all-time high of 72,366.34 on June 25. Since then, it has fallen about 11.3 percent. At one point on Friday, the index was down as much as 6.18 percent before recovering a little by the end of the day. Japan's broader Topix index also fell, dropping 2.72 percent to close at 3,919.21.

Much of the trouble started in the United States the night before. Technology stocks in the U.S. dropped sharply, especially those connected to computer chips. A key index that tracks chip company stocks in the U.S. fell 4.3 percent. Shares of South Korean chipmaker SK Hynix, which trades in the U.S., plunged more than 13 percent in a single night. These big losses made investors in Japan nervous about their own chip stocks.

One of the hardest-hit companies in Japan was Kioxia Holdings, a major maker of memory chips. Kioxia's stock fell 16.1 percent on Friday — its biggest one-day drop since November 2025. Other chip-related companies also took big losses. Sumco fell 15.17 percent, and Screen Holdings dropped 12.04 percent. These companies had all soared in value earlier this year because of excitement about artificial intelligence, or AI.

Kioxia had become a symbol of Japan's excitement about AI technology. Just last month, the company's total market value briefly topped that of Toyota, Japan's most famous automaker. But Kioxia's stock price has now fallen more than 50 percent from that peak. Experts say some investors are worried that the price of memory chips may not keep rising, even as demand for AI continues to grow.

South Korea's stock market was closed for a holiday on Friday, which made things worse for Japan. With South Korean investors unable to trade their own stocks, some selling pressure shifted to Japan's market instead. Daisuke Hashizume, a senior strategist at Daiwa Securities, said that the long-term outlook for AI and data centers has not changed. But right now, he explained, investors are unsure whether chip prices can keep rising at a steady pace.

Tensions in the Middle East also played a role in the selloff. U.S. President Donald Trump threatened to expand military strikes on Iran, which made investors around the world more cautious. When there is conflict or uncertainty, many investors pull their money out of stocks and move it to safer places. That kind of behavior is called "shunning risk assets," and it can cause stock markets to fall quickly.

Not every stock fell on Friday. Seven & I Holdings, the Japanese company that owns the 7-Eleven convenience store chain, actually rose 3.64 percent. The company said it was in talks to buy a stake in Zabka Group, a convenience store operator based in Poland. That positive news gave investors a reason to buy Seven & I shares even as the rest of the market was falling.

Analysts say the market drop is a correction after a very fast rise. Shoichi Arisawa of Iwai Cosmo Securities said he does not think the business outlook for AI and chip companies has really changed. He believes the market is simply adjusting after climbing so high, so fast. Many experts expect the excitement around AI to continue driving growth in the technology sector over the long term.