Japan’s Nikkei share average declined to a one-week low on Tuesday, pulling back after a robust rally that had propelled the index to consecutive record highs, leading investors to secure profits. The Nikkei dropped 3.6% to 69,788.38, hitting a one-week low and closing below the 70,000 mark for the first time since last Wednesday. The broader Topix slipped 2.6% to 3,990.38. The recent pullback comes on the heels of a robust rally fuelled by persistent buying in the AI and semiconductor sectors, which propelled the Nikkei above 72,000 for the first time on Monday, merely two sessions after it surpassed 71,000. “After a string of gains, the market appears to be seeing some mild profit-taking,” stated Masahiro Ichikawa.

Market breadth exhibited weakness, with 184 decliners in the Nikkei 225 compared to 41 advancers. AI-related shares, which have driven the recent market surge, were at the forefront of losses in anticipation of Micron Technology’s earnings announcement. Memory chipmaker Kioxia experienced a decline of 15.1%, while the tech investment giant SoftBank Group saw a drop of 10.1%. Shares of cable and optical fibre maker Fujikura 5803 experienced an increase of 5.3%. Among other notable losers, cable and components maker Furukawa Electric experienced a decline of 15.5%, while non-ferrous metals producer Mitsui Kinzoku saw a decrease of 12.6%.

Defensive names experienced notable gains, with dairy and confectionery producer Meiji Holdings rising by 3.5% and logistics firm Nichirei increasing by 3.1%. Technical indicators indicated overheating, as the Nikkei’s 14-day relative strength index reached 73 on Monday, surpassing the 70 threshold that implies overbought conditions, before declining to 61.1 on Tuesday. “The market had already been looking overheated for quite a while as richly valued names kept rising, so it would not have been surprising to see a correction at any time,” Ichikawa said. “Today, the selling appeared to pile up.”