Japan's stock market is expected to open higher on Monday, 9 November, after the Nikkei 225 suffered one of its sharpest weekly declines in years, with a rebound in United States technology shares and stronger overnight futures pointing to an initial recovery.

The benchmark index plunged 9.25% last week to close at 57,434.77 on Friday, 6 November. On Friday alone, it fell 3,643.13 points, or 5.96%, marking its fifth consecutive daily decline and one of its largest single-day point losses. The broader TOPIX index dropped 5.90% to 3,707.99 on Friday, taking its weekly decline to 6.48%, as selling spread from semiconductor and technology companies to banks, manufacturers, retailers and other sectors.

The selloff has raised concerns that Japan's powerful equity rally, driven largely by enthusiasm for artificial intelligence and semiconductor investment, may be entering a more prolonged correction. The Nikkei has fallen below the psychologically important 60,000 level, leaving investors to judge whether the decline is a chance to buy shares at lower prices or the start of a broader reassessment of corporate valuations.

Monday's opening is nevertheless expected to find support from the recovery in United States technology stocks on Friday. The Nasdaq Composite gained 1.09%, while the Philadelphia Semiconductor Index climbed 4.21%, providing some relief after several sessions of heavy selling.

Futures point to a firmer start. Nikkei 225 futures traded in Osaka finished the overnight session at 58,250, approximately 815 points above Friday's cash-market closing level, suggesting Tokyo shares could recover more than 1% at the opening if overseas market conditions remain favourable. Nikkei futures on the Singapore exchange were up 1.1% at 58,220, according to Dow Jones Newswires. The recovery indicated by futures remains modest compared with the previous week's losses, and investors are likely to remain cautious about whether buying interest can be sustained.

The Nikkei's immediate challenge will be to recover towards 58,000 and 58,250, with a move back above 60,000 likely to be seen as an important signal of improving sentiment. A renewed decline below Friday's intraday low of approximately 56,746 could increase pressure on investors to reduce their exposure to equities.

Currency movements are also likely to influence trading. The dollar was trading around 158 yen late on Friday in New York, and stood at 158.37 yen against 157.92 yen at Friday's Tokyo close, leaving the Japanese currency relatively weak despite the turmoil in equity markets. A weaker yen generally benefits major exporters by increasing the yen value of overseas earnings, although it also raises import costs for Japanese households and businesses.

Borrowing costs add another layer of uncertainty. Japan's 10-year government bond yield stood around 2.63% at the end of last week, while the corresponding United States Treasury yield was approximately 4.86%. The unusually elevated level of borrowing costs in both countries has added uncertainty for highly valued technology companies, whose share prices are particularly sensitive to expectations for future interest rates.

The most important overseas event of the week comes on Tuesday, 10 November, when the United States releases its October consumer price index. A softer-than-expected reading would likely ease concerns about persistently high United States interest rates and could support Japanese equities on Wednesday. Stronger inflation could push Treasury yields higher, strengthen the dollar and renew selling pressure on semiconductor and other growth-related stocks.

The domestic earnings calendar is crowded. Results from SoftBank Group, Honda, Nissan, Recruit Holdings, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group are scheduled between Monday and Friday, and they will test whether Japan's recent share-price declines reflect deteriorating business conditions or mainly a shift in global investor sentiment. Earnings on Monday include Fujifilm Holdings, Ajinomoto, Kikkoman, Kubota, Mazda, Mitsubishi Estate, Orix, Sharp, Furukawa Electric, Kokusai Electric and shipping group Mitsui O.S.K. Lines.

Monday's trading will also be influenced by Japan's preliminary leading and coincident economic indicators for September, due at 2 p.m., along with China's October inflation figures. On Tuesday, the Bank of Japan releases a summary of opinions from its 29-30 October monetary policy meeting, which investors will examine for signs of another interest-rate increase as early as December. The central bank raised its benchmark policy rate to 1.25% in September before leaving it unchanged in October.

For Monday, the immediate outlook favours a technical rebound following the scale of Friday's selloff, particularly among semiconductor companies and other stocks that experienced heavy selling. Across the week, however, the central expectation is for continued wide fluctuations rather than a steady recovery, with the Nikkei able to attempt a move back towards 59,000 or 60,000 if United States technology stocks stabilise, inflation data are favourable and earnings beat expectations, or back towards 56,000 or lower if earnings disappoint or bond markets come under renewed pressure.