Japan's Nikkei 225 index snapped a four-day losing streak on Friday, propelled by a 12% surge in heavyweight SoftBank Group and supported by a robust Wall Street session overnight. The benchmark closed 1.26% higher at 65,020.94 points, yet still ended the week with a 2% loss.
SoftBank Group jumped 11.78%, contributing the most to the Nikkei's gains, following a 3.29% overnight rise in its chip division Arm Holdings. Memory chip maker Kioxia advanced 5.4% as well.
Despite the yen strengthening against the dollar, Japan's top currency official Atsushi Mimura reiterated on Friday that his stance on defending the yen remains consistent. Speaking to reporters in Tokyo, Mimura noted he has maintained close communication with US authorities since the G20 meetings earlier this week.
Nomura Securities suggested that in an extreme scenario of continued yen weakness, the Bank of Japan (BOJ) could deliver consecutive rate hikes across three meetings before December. Yujiro Goto, Nomura's head of Japan FX strategy, said a 25-basis-point increase this month "looks reasonable" and that "if yen weakness continues toward 160, October and December could see back-to-back hikes."
Goto's remarks underscore a significant shift in market expectations for the BOJ, which has previously taken a cautious approach to policy normalization. The yen has strengthened more than 2% this week to around 156 per dollar, driven by speculation that Japan's Government Pension Investment Fund (GPIF) may be reconsidering its asset allocation, along with expectations for faster BOJ rate hikes. Overnight index swaps (OIS) now fully price in a 25-basis-point BOJ hike in September, with another increase in January also fully reflected.
Regarding the cabinet reshuffle and senior Liberal Democratic Party (LDP) appointments, Prime Minister Shigeru Ishiba has begun discussing keeping Finance Minister Katsunobu Kato in his post. According to multiple government officials, consultations are underway to retain Kato. A special Diet session in the autumn will consider a consumption tax reduction bill, seen as key legislation. Ishiba is believed to have decided to retain Kato, considering the importance of continuity for the minister overseeing this critical legislation, and given that Kato has been consulting with US Treasury Secretary Scott Bessent on monetary policy.
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