Japanese Shares Climb Despite Middle East Tensions

The Nikkei 225 Index rose 1.26% to close at 38,311, while the broader Topix Index climbed 0.75% to 2,777 on Monday, rebounding from losses in the previous session as investors appeared to downplay escalating geopolitical tensions in the Middle East. Over the weekend, clashes between Israel and Iran intensified, with both countries reportedly targeting energy infrastructure, contributing to a sharp uptick in global oil prices. Despite the uncertainty, Japanese equities found support from a weaker yen, which enhances the earnings prospects of Japan’s major exporters and helped lift sentiment in sectors such as industrials, technology, and manufacturing.

Meanwhile, attention is shifting to the Bank of Japan’s upcoming policy meeting later this week. While the central bank is widely expected to keep its interest rates unchanged, markets will be watching closely for any shifts in guidance, particularly regarding the impact of rising energy costs on inflation expectations. Analysts suggest that the BOJ may adopt a cautious tone, balancing concerns over imported inflation with the fragile state of domestic consumption and wage growth.

In corporate news, tech and defense-related stocks outperformed, with Advantest surging 9.6%, Metaplanet rallying 25.6%, and Disco gaining 4.3%, driven by continued optimism over AI-linked demand. Mitsubishi Heavy Industries and IHI Corp also posted strong gains—2% and 3.5%, respectively—on the back of rising defense and aerospace sector interest amid global security concerns. Overall, the session reflected a cautious yet opportunistic mood, as investors weighed geopolitical risks against monetary policy expectations and sector-specific growth drivers.