Japanese Stocks Retreat as Market Eyes Policy Shifts from New Leadership
Tokyo – Japanese stocks closed lower on Tuesday, February 17, 2026, as investors reacted to upcoming meetings between Prime Minister Takishi Sano and U.S. President Donald Trump, and monitored signals regarding potential shifts in economic policy. The Nikkei 225 index fell 0.42%, according to the Kyodo News.
The market’s movements reach amid anticipation of discussions between the two leaders regarding defense spending and a potential $550 billion investment fund, as reported by Sina Finance. The Nikkei had previously surged, breaking the 50,000 point barrier on Monday, fueled by optimism surrounding the upcoming summit.
Despite an initial surge, the Nikkei experienced a high of nearly 58,000 points before retracting. According to the Nikkei Chinese edition, the index briefly surpassed the 58,000 point mark during trading.
Hideyuki Ishiguro, Chief Strategist at Nomura Asset Management, suggested a period of consolidation may follow Monday’s gains, stating, “After a large increase yesterday, there may be a tug-of-war between buying and selling in early trading, but expectations for the US-Japan talks and earnings from Advantest should gradually push the market towards buying.” This indicates investor confidence remains, albeit tempered by short-term profit-taking.
Hopes for a potential trade agreement between major economies and expectations of interest rate cuts by the Federal Reserve are also providing support for the Japanese stock market. Though, Nidec Corp., a precision motor manufacturer facing accounting issues, is expected to weigh on the Nikkei 225 after being removed from the index on November 5th, as noted in Sina Finance. The Tokyo Stock Exchange has initiated a special oversight process for the company, requiring it to demonstrate robust internal controls.
Investors are also focused on corporate earnings reports, with Advantest, the world’s largest chip testing equipment manufacturer, and Nomura Holdings, a major brokerage firm, scheduled to release their financial results on Tuesday. The performance of these key companies will likely influence market sentiment in the coming days.
Meanwhile, broader Asian markets also showed strength, with South Korea’s KOSPI index rising significantly. Eastmoney reported that the Korean index surged, with several major companies experiencing substantial gains.
The yen has also experienced significant volatility, recently falling to a 34-year low against the dollar, while Japanese stocks have reached a 75-year high, creating a “stock and currency double kill” situation, according to Sohu. Prime Minister Sano sought a meeting with President Trump to address these concerns and repair strained relations, but encountered a cool reception from the U.S. Administration.
The market is also reacting to a broader shift in the relationship between the U.S. And Japan, moving from a traditional alliance to a more transactional dynamic, as highlighted by Sohu. Trump has reportedly criticized Japan for benefiting from the alliance without contributing enough to defense spending.
In a separate report, AASTOCKS.com noted that the Japanese stock market closed down 135 points, with bank stocks underperforming while SoftBank bucked the trend with a nearly 7% gain.
