On October 5, the Nikkei 225 index opened nearly 2% higher and continued to climb, with gains expanding to 2.58% as it broke through the 70,000-point level. Notably, on October 1, the Nikkei 225 surged as much as 3.33% before pulling back on October 2. So far, across the three trading days in October, the Nikkei 225 has accumulated a gain of 4.79%. On an individual stock basis, Advantest and Renesas Electronics rose more than 4%, while SoftBank Group and Tokyo Electron gained over 3%, and Kioxia advanced more than 1%.
Holiday Overseas Rally Lifts Sentiment
Looking at overnight markets, today's higher open for Japanese stocks was mainly driven by supportive overseas factors. Last Friday, U.S. stocks closed higher across all three major indices, buoyed by an unexpectedly weak nonfarm payrolls report and declining energy prices. The S&P 500 rose 0.73%, the Dow Jones gained 0.49%, and the Nasdaq climbed 1.19%, hitting a new intraday record high. Meanwhile, the minutes from the Federal Reserve's September 15-16 policy meeting are scheduled to be released at 2:00 PM Eastern Time on October 7 (2:00 AM Beijing Time on October 8). At the September meeting, the Fed raised the federal funds rate target range by 25 basis points to 3.75%-4.00% and emphasized that inflation remains elevated. Funds are positioning ahead of policy expectations, short-term deep short-selling is being avoided, and global risk appetite has broadly recovered.
Beyond the positive factors, there are also pressures that cannot be overlooked. On October 2, the Nikkei index in Tokyo closed down 647.26 points at 68,309.46, a decline of 0.94%. The pullback was attributed to profit-taking after consecutive sharp gains, compounded by rising U.S. crude oil futures. The Topix index fell 40.98 points to close at 4,091.00, down 0.99%. On the inflation front, Tokyo's core consumer price index rose 2.7% year-on-year in September, up from 1.8% in August. This gauge, which includes fuel prices but excludes fresh food, exceeded the Bank of Japan's 2% target for the first time since January and marked the fastest pace since a 2.8% increase in November last year. The notable acceleration in inflation further strengthens the case for the Bank of Japan to continue raising interest rates. Last month, the BOJ raised its key policy rate to the highest level in 31 years. Governor Kazuo Ueda stated that as underlying inflation gradually approaches the 2% target, the central bank's policy focus has shifted from stimulating inflation to preventing it from overshooting. However, the BOJ still believes that underlying inflation has not yet fully reached the 2% target. Currently, the market has lowered expectations for a consecutive rate hike by the BOJ in October, but many investors still expect the central bank to tighten policy further in December.
A $140 Billion National-Level Order
On October 1, JERA, Japan's largest power generation company, announced the signing of a memorandum of cooperation with Dell Technologies and UK-based AI infrastructure developer RHAELM to build a standardized, replicable AI infrastructure development framework in Japan. The first site will be located in Chiba, on land adjacent to JERA's Chiba thermal power station. JERA Global President Yukio Kanai stated that the three companies plan to build gas-fired power generation infrastructure to support AI data centers with a total capacity of 3-4 gigawatts within five years. "The key phrase is rapid power supply capability." JERA can trade 35 million tons of liquefied natural gas annually, providing fuel for the power plants. According to estimates, the construction cost for 1 gigawatt of computing power supporting infrastructure ranges between $35 billion and $45 billion. Based on this, the total investment required to build the aforementioned scale of infrastructure would be approximately $140 billion. This is not a single order, but a template of "setting standards first, then replicating to other power plants." The three parties have made clear that they will apply the same model to JERA's other power stations in Japan as well as other markets in Europe and Asia in the future.
Why Is Japan in Such a Hurry?
Because its position in the global computing power landscape does not match its economic size. According to a report by the International Data Center Management Association, U.S. data centers consume 29.2 gigawatts of electricity, accounting for 43% of global data center power consumption; China consumes 8.5 gigawatts; Japan has only 1.7 gigawatts. The Japanese government has already included cloud computing and data center infrastructure in its strategic industry plan, aiming to achieve 32.7 trillion yen ($206 billion) in public-private joint investment by 2035. Additionally, Blackstone plans to invest $30 billion in Japan over the coming years to develop data centers, and an Abu Dhabi-backed investor is planning a project in Akita with approximately 2 trillion yen and 500 megawatts. Bank of Japan Deputy Governor Shinichi Uchida has stated that AI is viewed as a massive positive demand shock, exerting upward pressure on the economy and prices. AI may also affect the supply side, potentially bringing positive effects by boosting productivity and promoting capital accumulation, which in turn could influence the natural rate of interest. Uchida noted that it remains unclear to what extent AI will impact the economy within the traditional policy framework.