SoftBank jumps 5% as Nikkei rallies, but BOJ could spoil the party

SoftBank Group jumped more than 5% in Tokyo on Friday as technology shares rallied amid easing fears of another US interest-rate increase.

SoftBank rose 5.3% in early trade, helping the Nikkei 225 climb 1.8% to 69,523.56.

The move followed softer-than-expected US producer-price data, which pushed the probability of a Federal Reserve rate increase in September down to about 35%.

For SoftBank, whose valuation is increasingly tied to AI assets including Arm and OpenAI, easier US rate expectations are supportive.

But investors are also becoming more confident that the Bank of Japan will tighten again in September, creating currency risk.

SoftBank is becoming a bigger bet on AI

SoftBank’s sensitivity to global technology sentiment has increased as Masayoshi Son concentrated the group around AI.

Its net asset value jumped from about ¥40 trillion at the end of March to ¥72.3 trillion at the end of June, helped by gains in Arm and Intel.

July’s market correction then pushed NAV back towards ¥58.3 trillion by August 5, showing how quickly paper wealth can move when technology valuations turn.

Lower US rate expectations can support expensive technology assets, improving the backdrop for businesses that make up a larger share of SoftBank’s portfolio.

Deutsche Bank analyst Peter Milliken has warned about the other side.

MarketWatch reported in June that Milliken downgraded SoftBank to Hold, saying investors were “vulnerable to a reversal” in either elevated technology prices or the weak yen after the stock’s enormous run.

BOJ is becoming harder to ignore

The BOJ raised its policy rate to 1% in June, and expectations for another increase are strengthening after yen weakness and elevated inflation.

Markets now see a 76% probability of a September hike, according to Tokyo Tanshi, up from 24% on July 30.

Former Japanese currency diplomat Mitsuhiro Furusawa told Reuters that most market participants now expect the BOJ to move next month.

Citi has taken a similarly hawkish view. Analysts told the Financial Times that “more hawkish action than previously is now clearly required” and forecast the policy rate reaching 2% by the end of 2027.

Goldman Sachs has said risks are skewed towards an earlier rate increase.

The mechanism matters for SoftBank, as higher Japanese rates can strengthen the yen by narrowing the yield gap with the US.

A stronger yen reduces the yen-translated value of dollar-denominated overseas assets and removes part of the currency tailwind that helped SoftBank during the yen’s decline.

Stronger yen could test SoftBank’s run

SoftBank still has powerful reasons to rise. Arm remains central to the AI chip ecosystem, OpenAI represents one of Son’s largest bets, and the group is committing billions more to data centres and AI infrastructure.

But those exposures make the stock unusually sensitive to technology valuations and foreign exchange.

A rapidly rising yen could also trigger broader volatility by encouraging investors to unwind yen-funded carry trades, where cheap Japanese borrowing finances investments in higher-return assets abroad.

That does not mean one BOJ hike would end SoftBank’s AI rally.

Its overseas holdings could appreciate to outweigh currency pressure, while a gradual yen recovery would be less disruptive than a sudden surge.