Japanese equities delivered mixed performance as the TOPIX rose 0.2%, marking a fourth consecutive monthly gain and closing above 4,000 points for the first time, while the Nikkei 225 fell 8.1% amid a sharp sell-off in AI and semiconductor stocks. Concerns over excessive AI investment by US hyperscalers, intensifying competition from Chinese firms, and profit-taking following earlier gains weighed on sentiment, although buying in undervalued and cyclical sectors helped support the broader market. Shipping, Rubber Products, Steel, Insurance and Mining led gains, while Non-ferrous Metals and other semiconductor-linked sectors lagged. The market was also affected by renewed Middle East tensions, higher oil prices and hawkish Federal Reserve commentary, while weaker US employment data and positive Bank of Japan Tankan results provided some support. Value stocks outperformed growth, while the TOPIX was more resilient than the Nikkei given its lower exposure to technology stocks. Foreign investors also returned as net buyers for the first time in two months.

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