TOKYO: Japan's Nikkei share average fell on Monday as a slump in technology shares following last week's rally beat market relief over an unsurprising Bank of Japan (BOJ) decision last week.
The Nikkei declined 0.6% to 39,699.76 as of the midday break, while the broader Topix was up 0.5% at 2,764.66.
The stock market received some support after the BOJ's monetary policy concluded on Friday without a fuss, with the central bank raising interest rates as widely expected. Markets are still only expecting another 25 basis points of tightening this year.
The financial sector outperformed, with banks leading Tokyo Stock Exchange's 33 industry sectors.
Japan’s Nikkei rises as tech shares gain
Exporter shares including automaker giant Toyota Motor and peer Honda Motor also gained, as the yen hovered around 155.61 per dollar after briefly strengthening to the 154 range on Friday.
Of the Nikkei's 225 constituents, 180 were up.
But Japan's heavyweight technology shares saw sizeable losses, backtracking from gains made last week on news of US investment plans to fund infrastructure for artificial intelligence.
Advantest, which counts US chip darling Nvidia among its customers, declined 8.2% to become the biggest drag on the Nikkei.
Some market players are watching DeepSeek after the Chinese AI startup rolled out an open-source reasoning model called DeepSeek-R1 that it said rivalled OpenAI's o1 on several performance benchmarks.
"There's a view that DeepSeek's (open-source AI model) might become the world's best," said Nomura Securities strategist Maki Sawada. "This could also be affecting the market, but we're likely seeing a reversal from last week's rally," she added.
Wall Street's main indexes closed lower on Friday to dampen investor sentiment in Asia.
The technology sector weighed on the market as megacap stocks reversed their sharp rally earlier in the week.
Among big-names shares, AI-focused startup investor SoftBank Group was down 6.3% and chip-making equipment giant Tokyo Electron stumbled 4.5%. Uniqlo parent Fast Retailing added 0.8%.
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