The South Korean Kospi index closed 2.1% lower on Thursday, while Japan’s Nikkei 225 fell 1.8% in early trading, marking a sharp reversal from a multi-week rally in tech stocks that had driven both markets higher in mid-July. The declines followed a series of mixed economic signals and shifting investor sentiment, with tech sector losses amplifying broader market volatility.
Shares of major South Korean technology firms, including Samsung Electronics and SK Hynix, declined 3% to 5% on Thursday, reflecting concerns over slowing global demand for semiconductors. Japan’s tech sector also saw declines, with Tokyo Electron dropping 2.4% and Fanuc falling 1.6%. The moves came as investors recalibrated positions after a surge in tech stocks earlier in the month, fueled by optimism over artificial intelligence investment and improved corporate earnings.
Analysts pointed to multiple factors behind the sell-off, including a rise in U.S. Treasury yields and renewed fears of tighter monetary policy. The 10-year U.S. yield climbed to 4.35% on Thursday, its highest level since May, prompting investors to retreat from riskier assets. “The tech sector’s recent gains were built on speculative bets about AI adoption and global recovery, but higher borrowing costs are now pressuring those valuations,” said Kim Min-jun, a Seoul-based equity strategist at Kiwoom Securities.
In Japan, the Bank of Japan’s recent decision to maintain its ultra-loose monetary policy despite rising inflation added to market uncertainty. While the central bank reiterated its commitment to “appropriate monetary easing,” officials acknowledged “moderate inflationary pressures” in a statement released on Wednesday. The Nikkei’s decline coincided with a weaker-than-expected reading on Japan’s core consumer price index, which rose 3.2% year-on-year in June—a slowdown from May’s 3.7% but still above the bank’s 2% target.
Market participants are now closely watching the Federal Reserve’s upcoming policy meeting, scheduled for September 18-20. A potential rate hike or hints of prolonged high interest rates could further weigh on tech stocks, which have been sensitive to changes in discount rates. “The key question is whether the Fed will signal a more hawkish stance, which would compound pressure on growth-oriented sectors,” said Emily Chen, a Tokyo-based analyst at Goldman Sachs.
South Korea’s finance ministry declined to comment directly on the market swings, but officials reiterated their focus on stabilizing the economy through fiscal measures. Japan’s Ministry of Economy, Trade and Industry also emphasized its commitment to supporting innovation, though it stopped short of announcing new stimulus measures. Both governments have faced growing pressure to address slowing economic growth, with South Korea’s second-quarter GDP expanding at a 0.3% annualized rate and Japan’s economy contracting 0.6% in the same period.
The recent volatility has also sparked debates about the sustainability of the tech sector’s rebound. While some investors remain bullish on long-term AI-driven growth, others warn that short-term fundamentals—such as declining semiconductor demand and rising production costs—could limit gains. “The market is caught between optimism about future technologies and the reality of current economic headwinds,” said Takashi Nakamura, a portfolio manager at Mitsubishi UFJ Asset Management.
As both markets await further clarity, the next major data releases—including South Korea’s trade balance and Japan’s industrial production figures—are expected to provide additional insight into the economic outlook. For now, investors remain on edge, balancing the potential for technological disruption against the risks of a broader economic slowdown.
