Yen Surges on US-Japan Joint Intervention... Kioxia's Rebound Path Blocked Amid 65% Plunge

▲ Japan, Yen (JPY), Kioxia/AI Generated Image

Despite the joint yen buying intervention by the United States and Japan, the Japanese stock market did not fluctuate significantly. However, Kioxia Holdings (285A) is in a difficult situation to be relieved. Poor earnings outlook is compounded by the strong yen and the risk of interest rate hikes in Japan.

According to crypto news outlet BeInCrypto on August 4 (local time), the Nikkei 225 index moved at the 63,300 level, down 0.6% that day. Following a 1.4% drop the previous day, it showed weakness for the second consecutive day, but the large-scale sell-off that the market had feared did not materialize. The United States and Japan engaged in joint yen buying intervention for the first time in decades.

Kioxia Holdings' stock price rose slightly that day. In contrast, SoftBank Group (9984) and Advantest (6857) fell amid weakness in semiconductor stocks. Kioxia Holdings has already plunged 65% from its June high. The yen moved between 155-157 yen per dollar after rising up to 3.8% over two days last week. Yen buying intensified as Japanese Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent confirmed joint market intervention.

Kioxia Holdings' operating profit forecast for the first half of the fiscal year, announced on July 31, fell short of market expectations. On the same day, the company announced a stock split, dividing one share into three, and a share buyback plan, but these failed to alleviate the poor earnings outlook. Memory semiconductor companies with a high proportion of exports are disadvantaged when converting overseas sales into yen as the yen's value rises. This means that exchange rate burdens have increased in a situation where earnings forecasts have been lowered.

The volatility of global memory semiconductor prices was also cited as a risk factor. AI-related semiconductor stocks showed an unstable trend throughout July. SK Hynix and Samsung Electronics stock prices also moved significantly during the same period. Kioxia Holdings is in a situation where it must contend with both industry fluctuations and a strong yen simultaneously.

The market's attention is turning to the Bank of Japan (BOJ)'s September monetary policy meeting. The BOJ froze its benchmark interest rate at 1% last week but left open the possibility of further hikes. Bessent repeatedly stated to BOJ Governor Kazuo Ueda that monetary tightening should be expanded. If the BOJ raises interest rates, the yen is more likely to rise further. Japanese authorities also signaled that they would re-intervene in the market if the yen fell back to recent lows. Kioxia Holdings is facing poor earnings forecasts, exchange rate burdens, and monetary policy risks simultaneously.

[Article Summary]

-The Nikkei 225 index only fell by 0.6% despite the joint yen buying intervention by the United States and Japan.

-Kioxia Holdings plunged 65% from its June high, and its operating profit forecast for the first half also fell short of market expectations.

-The possibility of a BOJ interest rate hike in September and a further rise in the yen are increasing the burden on Kioxia Holdings.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*