[4th Week of August 2025] Entering a Correction Phase? Focusing on Trends in the U.S. Market [Weekly Market Analysis]

Recently, there has been a lot of excitement about news of Japanese stocks hitting record highs, but don't you feel like things have calmed down a bit this week? Some of you might be feeling anxious, wondering, "Will this momentum continue?"

In this article, I will explain the key points of this week's market and the future outlook in detail so that even if you are busy, you can grasp it quickly. I found it difficult at first too, but if you focus on the key points, I'm sure you can understand it.

This Week's Japanese Stock Market: Overall Trends and Background

After hitting historic highs the previous week, the Japanese stock market shifted to a correction phase this week.

The Nikkei Stock Average, a major stock index, fell from a closing price of 43,470 yen on August 15 to 42,578 yen on August 22, a decline of approximately 2.05%. This is due to short-term overheating from the previous week's surge and trends in overseas markets.

• Profit-taking sales dominate: With the market hitting all-time highs, sell orders to lock in short-term profits occurred one after another across a wide range of stocks.

• Linked to the U.S. market correction: Following the announcement of economic indicators in the U.S., major stock indices in the U.S. market fell. This also affected Japanese stocks and dampened investor sentiment.

Sector Analysis: Which sectors should you watch in this week's market?

While the market as a whole fell this week, let's look at the sectors that showed particularly significant movement.

• Top gainer: Pharmaceuticals

  • In times of market instability, there is a tendency for funds to flee to defensive sectors such as pharmaceuticals, which are less susceptible to economic fluctuations. This trend was prominent this week, and the pharmaceutical sector outperformed the overall market.

• 2nd place gainer: Services

  • Against the backdrop of the domestic economic reopening and the continued strong inbound demand, the service industry remained solid. In particular, buying interest was seen in companies providing services closely related to people's daily lives, such as entertainment and dining.

• Top loser: Electric Appliances

  • Semiconductor-related stocks, which had been strongly driving the market until the previous week, saw concentrated selling following the correction of IT and high-tech stocks in the U.S. market. For some stocks, the reaction to short-term overheating also compounded, leading to a significant decline.

Individual companies that attracted attention this week: Why did they move?

Apart from the movement of the sector as a whole, I will introduce two companies that attracted particular attention due to individual news.

• Densan System Holdings (Densan System HD)

  • Why did it move?: Announced the signing of a basic agreement for a joint study on the use of yen-denominated stablecoins with Sumitomo Mitsui Banking Corporation and others. This was well-received by the market as a new business development that will lead the future of digital finance, and the stock price was bought up to the daily limit.

• Nippon Antenna

  • Why did it move?: Announced that it will be made a wholly owned subsidiary by digital equipment manufacturer Elecom. Since Elecom will acquire all shares through a stock swap and the specific stock swap ratio was indicated, speculative buying entered, and the stock price surged.

Global Perspective: The Impact of World Affairs on Japanese Stocks

This week, Japanese stocks were also significantly influenced by overseas trends.

• Trends in the US Market: US stocks, which had been firm until the previous week, saw major indices fall across the board this week. In particular, concerns about US inflation were reignited as the index showing US manufacturing activity in August reached its highest level in about three years. As a result, US long-term interest rates rose, weighing on the entire stock market.

• Currency Market: In the dollar-yen market, the yen weakened due to the rise in US long-term interest rates, moving in the high 148 yen range per dollar. A weaker yen is usually positive for Japanese export companies, but this week, caution regarding monetary tightening in the US market was strongly felt, and it did not lead to an overall rise in Japanese stocks.

• Monetary Policy and International Affairs: Market participants strengthened their wait-and-see stance ahead of the remarks by Fed Chair Powell at the Jackson Hole meeting scheduled for next week. In addition, news regarding former President Trump's policy trends continues to be reported, and uncertainty about future trade policies also affected market movements.

Future Outlook for the Japanese Stock Market: Points to Watch

The Japanese stock market has turned from the momentum of the previous week and entered a correction phase, but what is the outlook for the future?

• Short-term Outlook: The short-term sense of overheating has receded, but the trends in the US market will continue to hold the key. In particular, remarks by Fed Chair Powell at the Jackson Hole meeting will be an important hint indicating the direction of future monetary policy, so the market may become nervous.

• Factors to watch:

  • Jackson Hole Symposium: The biggest point of interest at this meeting, where central bank officials from around the world gather, is whether the US will change its monetary policy stance.

  • Domestic and international economic indicators: Upcoming releases such as Japan's second preliminary GDP report, US employment statistics, and the Consumer Price Index (CPI) are essential indicators for gauging economic health.

  • Major corporate earnings announcements: Continued strong corporate earnings reports will be a major factor driving individual stocks.

• Sectors likely to attract attention: Semiconductor-related stocks, where strong corporate earnings are expected, and export-related sectors such as semiconductors and automobiles, which continue to benefit from the weak yen, as well as domestic demand-related sectors like inbound-related and retail, will likely continue to draw attention.

Summary: This week's lessons and future investment strategies

Looking back at the Japanese stock market this week, the following three points were important.

• ✅ Correction from overheating: The market entered a correction phase due to the reaction to hitting record highs combined with trends in the US market.

• ✅ US market trends are key: It was demonstrated once again that Japanese stocks are heavily influenced by US market interest rates and monetary policy trends.

• ✅ Future focus on Fed Chair Powell: His remarks at next week's Jackson Hole Symposium may determine the future direction of the market.

This information will help solidify your investment decisions and serve as a step toward future asset building. Why not start by checking at least one of the economic indicators being released next week?

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