Japan's Nikkei 225 stock average closed 1.5% lower at 61,434.19 points, dragged down by the semiconductor sector. On Wednesday, the Nikkei average tumbled to a two-month low, as investors sold off chip-related stocks ahead of earnings reports from major US technology companies, while renewed conflict in the Middle East also dampened risk appetite.
Recently, Asian chipmakers have seen sharp share price volatility, as market participants question the returns on massive spending by artificial intelligence firms amid increasingly fierce competition. Eiji Kinouchi, an analyst at Daiwa Securities, noted that Tokyo stocks fell on Wednesday following an earthquake in Kumamoto Prefecture, southern Japan, on Tuesday. However, he added that the disaster should not pose a major threat to stock prices if damaged factories can resume operations within about a month. He pointed out that during the 2016 Kumamoto earthquake, production halts were mostly resolved within a month, and tech stocks only experienced a single-day decline. He stated that the focus should now shift to the recovery efforts of the semiconductor hub in the region.
On Wednesday, Toyota Motor Corp announced it would suspend operations at three plants in southern Japan until Friday, as it evaluates the earthquake's impact on suppliers and logistics. This decision came just hours after the factories had resumed production that had been halted the previous day. The 7.1-magnitude earthquake that struck Kumamoto Prefecture on Tuesday damaged roads, cut power to thousands of homes, and raised concerns about supply chains and logistics, affecting manufacturers like Toyota. The world's largest automaker stated in a release that it would halt production at its Miyata, Kanda, and Ogura plants from Wednesday until July 31. The company added, "The situation, including aftershocks and recovery work, is changing daily. We will continue to prioritize safety."
Honda Motor Co stated it would extend the suspension of its motorcycle plant in Kumamoto until Friday to carry out repairs on earthquake-damaged sections of the facility. Meanwhile, chipmaker Renesas Electronics Corp said it has suspended operations at two of its plants in Kumamoto Prefecture to investigate the impact of the earthquake on equipment.