Insights 
VT 
Key Points
- Nikkei 225 slipped 0.1% to 50,323.91, while the Topix fell 0.37% to 3,347.53.
- Retail and tourism-linked stocks plunged after China’s travel advisory, while Tokyo Electron and SoftBank led tech gains.
The Nikkei 225 closed 0.1% lower at 50,323.91 on Monday, retreating from an early 0.4% rise, as renewed political friction between Japan and China weighed on sentiment.
China’s foreign ministry issued a travel warning for Japan after tensions escalated over Taiwan, with Beijing cautioning Tokyo of a “crushing” military defeat should Japan intervene militarily.
The move marked another deterioration in bilateral ties after Japanese Prime Minister Sanae Takaichi said earlier this month that a Chinese attack on Taiwan would be a “survival-threatening situation” for Japan.
The travel warning dealt a blow to Japan’s tourism and retail sectors, both heavily reliant on Chinese visitors who account for a large share of inbound spending, particularly in cosmetics and apparel.
Retail and Tourism Stocks Hit Hard
Department store operators and consumer brands bore the brunt of the selloff. Isetan Mitsukoshi Holdings plunged 11%, while Takashimaya lost 6.18%. Cosmetics maker Shiseido fell 9.08%, and Uniqlo brand owner Fast Retailing dropped 5.29%, becoming the largest drag on the Nikkei.
However, some analysts said the selloff appeared overdone. Shoichi Arisawa of IwaiCosmo Securities remarked that “traders might have priced in all the bad news regarding Japan-China relations,” suggesting that further declines in retail names may be limited.
Tech and Financial Stocks Cushion Losses
Gains in the technology and financial sectors helped offset broader weakness. Tokyo Electron advanced 4.55%, supported by bargain-hunting in semiconductor names after last week’s dip. SoftBank Group added 2.83%, while Mitsui Kinzoku — a key supplier to AI data centres — surged 8.87%.
Among financials, Sumitomo Mitsui Financial Group climbed 4.57% after reporting a 57% jump in July–September net profit on Friday. Meanwhile, Mitsubishi UFJ Financial Group and Mizuho Financial Group edged lower by 1% and 0.26%, respectively, despite posting solid earnings.
Technical Analysis
The Nikkei 225 (Nikkei225) trades near 50,358.65, down 0.16%, consolidating below recent highs of 52,669.15. On the daily chart, short-term moving averages (5, 10, 30) show a mild bearish crossover, hinting at cooling momentum after an extended rally.
The MACD indicator has softened, but remains above the zero line, suggesting the broader uptrend remains intact. Immediate support lies around 50,000, with further downside toward 48,800 if selling deepens. Resistance is seen near 51,200–51,500.
Cautious Forecast
While global tensions and weaker consumer sentiment could weigh on tourism-linked sectors in the short term, analysts expect dip-buying in technology and banking stocks to stabilise the Nikkei around the 50,000 level.
If diplomatic rhetoric cools and global risk appetite improves, the index could rebound toward 51,500, though heightened volatility remains likely as traders monitor cross-strait developments and policy signals from Beijing.
