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Nikkei Rises 0.2% on Fed Rate Hike, Oil Price Drop, and Sector Rotation

The Nikkei index rose 0.2% Thursday amid investor rotation into gaming and pharmaceutical stocks, a 2.6% Brent crude decline, and the U.S. Federal Reserve’s widely expected 25-basis-point rate hike.

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Nikkei Rises 0.2% on Fed Rate Hike, Oil Price Drop, and Sector Rotation
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The Japanese Nikkei stock index advanced 0.2% on Thursday, building on an earlier intraday gain of 1%, as investors shifted capital toward shares in gaming and pharmaceutical firms following sharp prior declines. Broader market sentiment improved alongside a 2.6% drop in Brent crude oil prices and the U.S. Federal Reserve’s decision to raise its benchmark interest rate.

Fed raises rates 25 basis points, signals further hikes

The U.S. Federal Reserve increased its key policy rate by 25 basis points — its first such move in three years — and indicated the possibility of additional increases later this year. Fed Chair Jerome Powell stated that inflation in the United States remains elevated and described the rate decision as “well-considered,” noting apparent signs of economic improvement.

Tokyo market reaction and sector divergence

The broader Topix index climbed 0.6% on the day. However, semiconductor equipment manufacturers weighed on the Nikkei: Advantest fell 1.9%, and Tokyo Electron declined 2.2%. In contrast, artificial intelligence-linked equities posted gains: SoftBank Group rose 1%, and Fujikura — a cable manufacturer — added 0.6%.

Gaming and pharma stocks lead gains

Investors rotated into gaming and pharmaceutical shares. Nintendo surged 3.8%, Konami gained 3.7%, and Sumitomo Pharma jumped 4.5%. Meanwhile, oil-related stocks retreated sharply in response to falling crude prices: Inpex dropped 3.3%.

Market outlook remains cautious

Wataru Akijama, equity strategist at Nomura Securities, observed that “one of the main drivers behind the equity rally is the emergence of developments that have somewhat eased market uncertainty.” He added that although broad-based gains occurred across multiple sectors and stocks, “the Japanese stock market cannot currently be described as particularly strong.”

Bank of Japan policy decision expected Friday

Markets are now pricing in a 25-basis-point interest rate increase by the Bank of Japan, scheduled to announce its monetary policy decision on Friday. Ahead of that announcement, technology stocks sensitive to interest-rate shifts traded weakly.

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