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In October 2026, the Japanese equity market weakened, with the TOPIX falling 3.5% and the Nikkei 225 declining 5.2%, as rising oil prices, concerns over the sustainability of AI investment, and weaker sentiment towards global technology stocks weighed on markets. AI and semiconductor-related shares led the decline following credit concerns surrounding U.S. AI cloud providers and growing questions over the profitability of AI investment.

In September, Japanese equities delivered mixed performance amid rising geopolitical tensions in the Middle East, higher global bond yields and evolving monetary policy expectations. The Nikkei 225 outperformed, gaining 0.7%, while the broader TOPIX declined 1.1%, supported by a recovery in AI and semiconductor-related stocks despite weakness across much of the market. Early-month sentiment weakened as escalating regional conflict drove oil prices higher, inflation concerns intensified and the yen strengthened. Markets subsequently recovered as AI-related shares rebounded and pressure from energy prices and currency movements eased, before trading largely sideways towards month-end.