11 min read
The Nikkei 225 fell 10.27% in the month to November 12, 2026, closing at 60,819.36 (Yahoo Finance). Most of why the Nikkei 225 is falling comes from the AI chip trade breaking down across Asia, and it happened even though a yen at 159.71 per dollar should have helped Japanese exporters. Your bank savings aren’t touched by this. A Japan stock fund, though, has just had a one-month drop of correction size, and what happens next depends on Nvidia, US yields near 5% and the yen near 160.
Key takeaways
- The Nikkei 225 closed at 60,819.36 on November 12, down 10.27% in a month (Yahoo Finance). That’s about $1,027 gone from every $10,000.
- Over the same month the S&P 500 lost only 2.38% (Yahoo Finance), or $238 on $10,000. Japan cost you $789 more.
- The dollar bought 159.71 yen on November 12, up 0.88% in a month (Yahoo Finance), so dollar holders of unhedged Japan funds lost a little more than the index did.
- The US 10-year Treasury yielded 5.0% on November 11 (Yahoo Finance). That’s $500 a year on $10,000 with no stock risk at all.
Why the Nikkei 225 is falling this month
Look at where the losses landed. Yahoo Finance’s one-month figures: the Nikkei lost 10.27% and South Korea’s KOSPI lost 11.48%. The Nasdaq Composite fell 6.39% and the S&P 500 gave up 2.38%. The Dow, meanwhile, rose 1.58%, and Germany’s DAX gained 5.55%.
The two markets with the most chip and AI-hardware companies fell hardest. Europe’s industrial-heavy benchmark went up. A broad recession scare would have hit all of them. This looks like a sector sell-off aimed at AI, and Tokyo carries a lot of that sector.
The AI chip trade cracked, and Nvidia made it worse
Nvidia dropped 8% in after-hours trading on November 11 after a report that its board might remove CEO Jensen Huang (MarketWatch). Tokyo opened a few hours later and the Nikkei slipped another 0.7% on November 12. A day earlier CoinDesk’s live coverage had described a rebound in “battered AI stocks” when CoreWeave jumped 14% on earnings. Battered is the right word for the month.
I wrote up the Huang situation in Jensen Huang’s affair and Nvidia’s probe. What matters for Japan is the supply chain. Japanese companies make the chip-testing machines, equipment and specialty materials that go into AI processors. When the biggest customer in the AI chain looks unstable, Tokyo’s suppliers get repriced the same night.
Why a weak yen didn’t rescue Japanese stocks
Usually a weaker yen lifts the Nikkei. A Japanese exporter that earns dollars books more yen profit when each dollar converts into more yen. On November 12 the dollar bought 159.71 yen, up 0.88% on the month and 0.63% in one day (Yahoo Finance). By that logic, exporters should have rallied.
They didn’t, and that tells you something. When investors start doubting a sector’s future earnings, a few percent of currency gain doesn’t offset it. My data doesn’t show any Japan-specific trigger, such as a Bank of Japan surprise, so I’d treat this as risk Japan imported from the US AI trade. Nobody knows yet whether that changes once the Nvidia question is settled.
How the Nikkei 225 works, and why it magnifies AI swings
A price-weighted index, like the Dow
The Nikkei 225 is price-weighted. A stock with a high share price moves the index more than a bigger company with a cheaper share price. The Dow Jones uses the same method. Japan’s other main benchmark, the Topix, weights companies by market value and covers far more of them.
The effect is that a small group of expensive shares has outsized pull. That group includes Uniqlo owner Fast Retailing and chip-equipment makers such as Tokyo Electron and Advantest. If the chip names fall together, the Nikkei falls further than the wider Japanese economy would justify. It’s the same mechanism that makes the KOSPI so dependent on its two memory-chip giants.
How far the Nikkei has run, and who is underwater
The Nikkei’s December 1989 peak stood for more than three decades, and the index didn’t pass it again until 2024. At 60,819.36 it still sits far above that old high, even after this month. Anyone who bought in the last three months is losing money, though: Yahoo Finance shows the index down 9.93% over that period. Almost all of that drop came in the last four weeks.
The macro chain: 5% Treasury yields, the yen and the carry trade
Start in Washington. The effective fed funds rate was 3.88% on November 9 (New York Fed). The 10-year Treasury yield was 5.0% on November 11 (Yahoo Finance), up 6.7% over three months. The dollar index stood at 102.92, up 2.91% over the same three months. Long-term money in dollars is expensive and the dollar is firm.
High long-term yields hit growth stocks hardest. A big share of an AI company’s value comes from profits expected years from now, and a 5% discount rate shrinks what those profits are worth today. CNBC reported that Treasury yields edged higher as investors waited for new inflation and housing data. If those numbers come in hot, the pressure on chip valuations in New York and Tokyo stays.
What is the yen carry trade?
A carry trade means borrowing in a currency with low interest rates and investing in one that pays more. Japan’s rates have been far below US rates for years. So investors borrow yen and buy dollar assets yielding around 5%, and they make money as long as the yen stays weak or keeps weakening.
The danger comes when the yen suddenly jumps. Borrowers then owe more in dollar terms and rush to repay, often by selling stocks, including Japanese stocks. That forced selling is called a carry-trade unwind.
What happened on August 5, 2024
That’s the precedent people in Tokyo remember. The Bank of Japan raised rates, the yen surged, and on August 5, 2024 the Nikkei fell 12.4% in one session, its worst day since 1987. It bounced back hard the next day. In 2022 and 2024, Japan’s Ministry of Finance bought yen to stop its slide, both times with the yen weak, as it is now. A dollar buying 159.71 yen is the kind of level where that risk comes back into play.
Nikkei 225 vs KOSPI, Nasdaq and DAX: how bad is Japan’s drop?
Here’s how the major markets compare, using Yahoo Finance data for the latest close available.
| Market | Last | 1 day | 1 month | 3 months | As of |
|---|---|---|---|---|---|
| Nikkei 225 | 60,819.36 | -0.70% | -10.27% | -9.93% | Nov 12 |
| KOSPI | 5,342.73 | -0.61% | -11.48% | -18.79% | Nov 12 |
| Nasdaq Composite | 25,466.19 | +1.60% | -6.39% | -4.22% | Nov 11 |
| S&P 500 | 7,619.38 | +1.31% | -2.38% | -1.67% | Nov 11 |
| Dow Jones | 52,486.49 | +0.49% | +1.58% | -2.39% | Nov 11 |
| DAX | 26,662.77 | +1.20% | +5.55% | +1.26% | Nov 11 |
| USD/JPY (yen per dollar) | 159.71 | +0.63% | +0.88% | +0.28% | Nov 12 |
| US 10-year yield | 5.0% | +0.3% | -4.2% | +6.7% | Nov 11 |
| Bitcoin | $73,545.16 | -0.57% | -11.49% | +16.0% | Nov 12 |
Two things jump out. First, Bitcoin lost 11.49% in a month, almost the same as the Nikkei. That’s what risk-off looks like, meaning investors cut anything volatile at the same time, whatever the asset. Second, Korea is worse off than Japan over three months, 18.79% down against 9.93%. I went through Seoul’s slide in KOSPI 5000 at Risk.
A note on the yield row: those percentages are changes in the yield itself. A -4.2% monthly move means the yield came down slightly from a month ago, not that it fell 4.2 percentage points.
What a 10.27% Nikkei drop means for your money
Let’s put it in dollars. Say you put $10,000 into a fund tracking the Nikkei 225 a month ago. In yen terms the index lost 10.27%, so the position is now worth about $8,973 before currency effects. The same $10,000 in an S&P 500 fund would have lost $238.
Dollar investors take the yen hit on top
An unhedged Japan fund held in dollars gives you two returns: the stock move and the currency move. With the dollar buying 0.88% more yen than a month ago, each yen of value is worth less to you, so a dollar investor’s loss was closer to 11% than 10.27%. Currency-hedged funds remove the yen swing but charge a hedging cost. Right now that cost is high, because US rates are so far above Japan’s.
By the numbers
- A $10,000 Nikkei 225 position lost about $1,027 in the month to November 12, 2026, at the index’s 10.27% decline (Yahoo Finance).
- The same $10,000 in the S&P 500 lost about $238 over the month to November 11, at its 2.38% decline (Yahoo Finance).
- Holding Japan instead of the US cost you about $789 more per $10,000 in one month.
- At the 5.0% US 10-year Treasury yield (Yahoo Finance, November 11), $10,000 earns about $500 a year. That’s also the return carry traders are chasing with borrowed yen.
How we calculated: one-month index changes for the Nikkei 225 (as of November 12, 2026) and S&P 500 (as of November 11, 2026) and the 10-year Treasury yield (November 11, 2026), all from Yahoo Finance, applied to a $10,000 example amount before fees and currency effects.
Is my money safe if I own Japanese stocks?
Cash in a bank account or money market fund isn’t exposed to the Nikkei at all. The effective fed funds rate is 3.88% (New York Fed), so cash still earns a real return while stocks are volatile. For stock funds, “safe” means something else: whether you can hold through a drop like this without being forced to sell.
A 10% drop is the size Wall Street calls a correction, a routine pullback that’s smaller than a bear market’s 20%. The Nikkei has come back from much worse, including that 12.4% single-day fall in 2024. The weak spots are leverage and short holding periods. If you need the money in the next year or two, it was never a good fit for a single-country equity fund.
Mistakes I’d avoid with a Japan fund right now
- Assuming a weak yen guarantees Japanese stocks go up. This month showed it doesn’t once sector fear takes over.
- Ignoring which currency you’re exposed to. An unhedged fund held in dollars loses on both the index and the yen when they fall together.
- Counting Japan and Korea as diversification against US tech. The KOSPI fell 11.48% and the Nikkei 10.27% on the same driver.
- Using margin or leveraged index products after a sharp drop. A carry-trade unwind like August 2024 can move the index double digits in a day.
I’ve made the overlap mistake myself, holding three funds that looked different on paper and then watching them drop together. Checking the top ten holdings across your funds takes five minutes.
What happens next for the Nikkei 225: three scenarios
I won’t give a price target. The answer depends on three things you can check yourself, so here they are.
Scenario 1: the Nvidia question gets settled and AI stocks steady
CNBC reported that Nvidia’s board meeting on Huang’s future ran into the evening of November 11. A clear decision either way removes the uncertainty premium Tokyo’s chip suppliers are carrying. If US AI names stabilize, the Nikkei usually follows, because its heaviest weights trade on the same story. The Nasdaq rose 1.6% on November 11 before the after-hours report, which shows how fast sentiment can flip.
Scenario 2: Treasury yields push higher from 5%
The 10-year is sitting right at 5.0%. Hot inflation or housing data would push it higher, and that weighs on growth valuations everywhere. For Japan it has a second effect: a wider US-Japan rate gap keeps the yen weak, which helps exporters’ earnings but adds to the carry-trade pile that could unwind later. I’d be careful here, because both effects feel fine right up until they don’t.
Scenario 3: the yen snaps back
This one carries the most risk in the short run. With the dollar at 159.71 yen, a sudden move back toward a stronger yen, whether from Tokyo stepping into the currency market or from a Bank of Japan rate move, would cut exporters’ profits and could set off forced selling like August 2024. Nobody knows the timing, and Tokyo doesn’t announce its interventions in advance.
FAQ
Is the Nikkei 225 in a correction?
By the usual definition, a drop of 10% or more, the one-month move qualifies: the index fell 10.27% to 60,819.36 as of November 12, 2026 (Yahoo Finance). That’s a correction, not a bear market, which conventionally starts at a 20% decline. The index is still well above its December 1989 peak, a level it only reclaimed in 2024.
Why is the Nikkei down when the yen is weak?
A weak yen helps exporters’ profits, but this month’s selling was driven by fear about AI and chip stocks. Japan’s heavyweight index members include chip-equipment makers tied to the same AI supply chain as Nvidia. When that story wobbled, currency gains weren’t enough to offset it.
Does Nvidia affect Japanese stocks?
Yes, through the supply chain and investor sentiment. Nvidia sank 8% after hours on November 11 on a report its board might oust Jensen Huang (MarketWatch), and the Nikkei fell 0.7% the next session. Japanese firms that sell testing gear and equipment for AI chips tend to move with Nvidia.
What is the difference between the Nikkei 225 and the Topix?
The Nikkei 225 is price-weighted across 225 large companies, so high-priced shares dominate it. The Topix weights stocks by market value and covers a much broader set of companies. In a chip-led sell-off the Nikkei usually swings harder because of how it’s built.
How does the yen exchange rate affect my Japan ETF?
An unhedged Japan fund held in dollars gains when the yen strengthens and loses when it weakens, on top of the stock move. The dollar rose 0.88% against the yen over the past month (Yahoo Finance), which added to dollar investors’ losses. Hedged funds remove most of that swing but charge a cost tied to the US-Japan rate gap.
Could the Nikkei crash like it did in August 2024?
The setup that caused it, heavy yen borrowing followed by a sudden yen surge, can come back whenever the yen is very weak and US yields are high. Today the yen is at 159.71 per dollar and the 10-year Treasury at 5.0%. That doesn’t mean a crash is coming. It means the index is more exposed to a yen shock than it would be with a stronger currency.
What I’m watching on the Nikkei 225 next
- The outcome of Nvidia’s board decision on Jensen Huang, and how Tokyo’s chip-equipment names trade the session after.
- USD/JPY around 160. A sharp move back toward a stronger yen is the carry-trade warning sign.
- The US 10-year around 5.0%, plus the inflation and housing data CNBC flagged as next up.
- The KOSPI as a cross-check. If Seoul and Tokyo stop falling together, the AI sell-off is probably losing steam. My take on whether US tech is stretched is in Wall Street stock market bubble risks.
If you own Japan, my advice is to know your currency exposure and your fund overlap before the next big swing. This is not financial advice. Do your own research.
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Sources marketwatch.com · cnbc.com
This article is for information only and is not financial advice. Crypto assets are volatile; you can lose all of your money.