Japan's Nikkei rallies towards record high as SoftBank surges amid AI fever

By Kevin Buckland

TOKYO, Oct 9 (Reuters) - Japan's Nikkei share average rallied towards a fresh high on Thursday, as index heavyweight SoftBank Group 9984.T surged more than 13% as investors bought into its vision of artificial intelligence-powered robots.

Robot manufacturer Yaskawa Electric 6506.T also shot up as much as 10.5%, with those two stocks vastly outperforming all others on the benchmark index.

The tech-heavy Nikkei .N225 climbed as much as 1.6% to 48,481.09, just below Tuesday's all-time peak of 48,527.33, before entering the midday recess at 48,405.93.

SoftBank alone added 506 points to the Nikkei's 671-point rally.

The broader Topix .TOPX, by contrast, gained a much more muted 0.3% to 3,244.15.

SoftBank said late in Wednesday's trading session that it had bought the robotics business of Switzerland's ABB ABBN.S, taking forward the Japanese startup investor's strategy to fuse robotics and AI, although it was largely ignored by the market initially.

"The moves in SoftBank and Yaskawa are so big compared to everything else, it's easy to think this is a delayed reaction," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. "It feels a little overdone."

Fellow robotics company Fanuc 6954.T, by contrast, was up a relatively small 2.2%.

The Nikkei may be ripe for a pullback, with a common gauge known as the relative strength index (RSI) at 77, well above the 70 level generally cited as an overheating indicator.

The auto sector .ITEQP.T was notably the worst performer among the Tokyo Stock Exchange's 33 industry groups, after reaching the highest level since the middle of last year on Wednesday.

The sector slid 1.7% despite persistent weakness in the yen JPY=, which buoys the value of overseas sales. Toyota 7203.T dropped 2.4%.

Japanese stocks were supercharged at the start of the week after fiscal dove Sanae Takaichi was elected as the head of the ruling Liberal Democratic Party, setting her up to become the country's next prime minister.

However, her ascension is not assured, with her right-wing politics creating friction with coalition partner Komeito, and the government holding a minority of seats in both houses of parliament.

The market could see additional volatility with the earnings season unofficially kicking off with Uniqlo parent Fast Retailing's 9983.T results later on Thursday. The stock was last up 0.9%.

Daiwa Securities strategist Kenji Abe, however, forecast the Nikkei can rally to 50,000 by the end of Japan's fiscal year in March.

"Earnings are improving," he said. "The Nikkei can rise further."

At the same time, "politics are important, and can inject near-term volatility," he said. "The market has high expectations for Takaichi's policies."