Japanese stocks weakened ahead of this weekend's snap lower house election, prompting market participants to adopt a defensive stance while awaiting political direction and a wave of corporate performance releases. Risk off sentiment emerged as investors reduced positions in volatility sensitive stocks, particularly the technology sector.

At the close of trading on Thursday, the Topix index fell slightly by around 0.1% to 3,652.41, while the Nikkei index fell further, by around 0.9% to 53,818.04. These movements reflect the market's "wait and see" approach ahead of election day.

The greatest pressure came from technology-related stocks. SoftBank Group was the main negative contributor, falling around 7%, dragged down by sentiment after its Arm Holdings sales projections were deemed disappointing to investors reducing risk appetite for the AI / tech theme.

Domestically, political factors also dampened buying interest. Prime Minister Sanae Takaichi scheduled elections for February 8 as a measure to strengthen the coalition's mandate. However, ahead of a crucial moment like this, markets typically reduce exposure because the risk of a surprise election result could trigger rapid movements in the yen, bonds, and stocks.

Furthermore, corporate performance reports also weigh on the index. Rohm shares, for example, plummeted around 9% after their outlook was deemed less than convincing and third quarter operating profit was reported below analysts' average expectations adding pressure on Japanese chip stocks.

Essentially, the Japanese stock market is in a "stress test" phase: elections and earnings are a combination that makes investors more selective. If the election result provides certainty about policy direction, the market has a chance of stabilizing but if fiscal/aggressive signals emerge that trigger volatility in the yen and yields, the pressure on stocks could continue. (asd) [sma]

Source : Newsmaker.id