Global AI trading retreats: Nikkei 225 approaches technical bear market, Japanese bonds follow US bonds in upward trend

According to Zhihui Finance APP, the wave of AI-driven sell-offs is spreading from Wall Street to Asian markets. Japan's Nikkei 225 Index is approaching a technical bear market as investors unwind AI-related trades. Meanwhile, Japanese government bonds rose on Friday, following gains in US Treasuries, further intensifying global risk-off sentiment.

The Nikkei 225 Index has recorded a significant decline since the end of June and is at risk of dropping 20% from its peak, entering a technical bear market. The performance gap between the tech-heavy Nikkei 225 and the broader TOPIX Index has widened to its largest in decades, highlighting the impact of concentrated liquidation of AI trades on Japanese stocks.

On Wall Street, the post-election slide in chip stocks has intensified and spread, with investors selling tech stocks amid speculation that the Democratic Party will clamp down on the AI industry. On Thursday, the Nasdaq 100 Index fell 6.4%—its worst single-day performance since March 2020—wiping out $2.3 trillion in market value. A key gauge tracking major chipmakers dropped 12%.

As the US equity sell-off spills over into Asian markets, global risk aversion has deepened further, with funds shifting from risk assets into government bonds. US Treasuries soared on Thursday, and Japanese government bonds rose on Friday. The benchmark 10-year Japanese government bond yield fell 7 basis points to 2.685%.

This latest rally in Japanese government bonds comes as demand has shown signs of improvement after yields reached multi-decade highs earlier this year. As yields rise and demand from domestic investors and foreign buyers recovers, market conditions are steadily improving, and global fund managers have also become more positive on long-term Japanese government debt.