Japan’s Nikkei share average closed higher for a third consecutive session on Wednesday, buoyed by AI-related shares. However, fresh hurdles in U.S.-Iran peace negotiations and investor caution in a volatile market constrained the extent of the gains. The benchmark Nikkei 225 advanced 0.59% to close at 70,474.96, paring an earlier surge of as much as 2.7%. The broader Topix ended 0.42% higher at 4,011.50. “Domestically, buying is likely to lead in chip-related stocks, suggesting the market will open higher,” analysts noted. “That said, the Nikkei average rose sharply at the open the previous day before quickly losing momentum, so investors should remain wary of short-term overheating and profit-taking.”

Tehran announced on Tuesday that it would not engage in discussions with senior U.S. envoys who had travelled to the region, as the two parties remain significantly divergent on a framework that would comprehensively facilitate access to the Strait of Hormuz. Market breadth exhibited a mixed performance, with 96 stocks advancing in the Nikkei 225 compared to 127 that declined, while two remained unchanged. Chip-related shares drove the benchmark’s gains, with Sumco surging 17.37% to its highest close since October 2007, while Taiyo Yuden jumped 12.43% to an all-time high. Screen Holdings 7735 experienced an increase of 9.46%, achieving a new record high.

Shares of Kawasaki Heavy Industries experienced significant volatility, initially increasing by over 5% before ultimately closing down by 7.66% for the day. Source reported the company was finalising plans to raise about 200 billion yen through new shares and convertible bonds to fund capital expenditure. Among decliners, department store operator J. Front Retailing 3086.T experienced a significant decline, falling 7.6% following underwhelming earnings results for the March-May period, marking it as one of the poorest performers within the Nikkei index.

Sentiment among large Japanese manufacturers showed improvement in the three-month period ending in June, reaching its highest levels since 2018, according to the Bank of Japan’s Tankan survey released on Wednesday. Companies anticipate a deterioration in business conditions over the forthcoming three months as they prepare for escalating costs and possible supply constraints resulting from the conflict in the Middle East.