Japan's Nikkei sinks under weight of strong yen; AI shares outperform

By Kevin Buckland

TOKYO, Jan 28 (Reuters) - Japan's Nikkei share average dropped on Wednesday as a sharply stronger yen scuppered sentiment in the exporter-heavy index, although gains for artificial intelligence-related stocks limited losses.

The Nikkei .N225 lost 0.5% to 53,052.77 in morning trading, with 193 of the index's 225 components falling.

The broader Topix .TOPX sank more than 1% to 3,525.78, with value shares .TOPXV outpacing declines among growth stocks .TOPXG.

The yen vaulted to 152.10 per dollar JPY= for the first time in three months overnight, with traders on high alert to the risks of coordinated yen-buying intervention.

Japanese Finance Minister Satsuki Katayama said on Tuesday that Tokyo will continue to closely coordinate with U.S. authorities over the exchange rate, and will take "appropriate action."

On Friday, the yen spiked from near 1-1/2-year lows in what appeared to be rate checks, which are often a precursor to actual intervention, by both the Bank of Japan and later by the U.S. Federal Reserve.

"This sharp yen appreciation is stoking concerns about the currency's impact on corporate earnings, leading to a broad-based decline across the Japanese stock market," said Wataru Akiyama, a strategist at Nomura Securities.

Several AI-linked stocks provided bright spots, notably cable makers Fujikura 5803.T and Furukawa Electric 5801.T, which each soared more than 11%. That followed news overnight that Meta Platforms META.O will pay Corning up to $6 billion to provide fiber-optic cables for its AI data centres.

SoftBank Group 9984.T climbed 3.5% on media reports it is in discussions to invest up to $30 billion more in ChatGPT maker OpenAI.

However, Shin-Etsu Chemical 4063.T, a silicon wafer producer, tumbled 10.3% after disappointing financial results. Peer Sumco 3436.T also dropped 5.7%.

Japanese earnings season is gathering momentum this week, with Nvidia supplier Advantest 6857.T, which makes chip-testing equipment, reporting results after the close on Wednesday. Its shares were up 0.5% ahead of that.