The Tokyo stock market today (the 2nd) saw the Nikkei Stock Average plunge 1,276 points to 52,463, posting a sharp decline from the previous trading day. While the highly volatile market exhibited a dramatic drop, the index managed to limit losses to less than half of the previous day's gains after showing resilience toward the close. Nevertheless, this was an extremely unsettling decline. The previous day, marking the genuine start of April trading, saw a dramatic surge after five trading days, jumping 2,675 points?the fourth-largest gain on record. With that momentum still fresh, the Tokyo market was dominated by a bullish mood in early trading today. On expectations of improving conditions in the Middle East, European and U.S. markets rallied across the board the previous day, with particularly strong buying in the semiconductor and high-tech sectors in the U.S. market, pushing the tech-heavy Nasdaq Composite Index up more than 1%. Carrying over this momentum, the Tokyo market opened with the Nikkei Average up around 320 points, gradually climbing higher to extend gains to over 500 points within just a few minutes.

At that moment, market attention was completely focused on President Trump's speech scheduled to begin at 10:00 a.m. Japan time. While investors' eyes and ears were concentrated on "what he would say," Trump had already spoken extensively about the scenario for a ceasefire with Iran and his confidence in achieving it, so this speech may have been viewed merely as an event to confirm that sense of security. The previous day, media reports indicated that the Iranian president had stated he was "prepared to end the war if guaranteed against retaliation," creating an implicit consensus that a ceasefire would lead to peace negotiations in the very near future.

However, disrupting the expected script is classic Trump. While prefacing that core strategic objectives were largely being achieved, he then pivoted to a context of "demolishing Iran in short order to accomplish this"?an almost artful betrayal of listener expectations. Specifically, he declared intentions to "inflict severe damage on Iran over the next 2-3 weeks and send them back to the Stone Age." According to market participants, "the phrase 'send back to the Stone Age' essentially declares the merciless destruction of Iran's lifeline infrastructure like power plants?a world without electricity" (online brokerage market analyst). This caused the bullish sentiment in the Tokyo market to evaporate.

Trump's recent statements go far beyond flip-flopping; market participants lament that "he reverses his previous statements so easily you'd almost suspect dementia. For markets being whipsawed by Trump's remarks, it's unbearable" (strategist at a mid-tier securities firm). While some viewed this as a deliberate dark technique of changing statements to intimidate and unsettle counterparts, it appears to be more of a shallow, haphazard approach that paints himself into inextricable corners. Under these circumstances, Trump's statements can neither be utilized for TACO trading nor ignored. With Trump at the controls, the United States is transforming into the world's most fearsome runaway locomotive.

For the time being, both buying and selling will be difficult. The current market's landscape changes daily. Rather than being swayed by these fluctuations, the option to "wait"?a privilege of individual investors?can be the strongest strategy. Opportunities are always available in the stock market, and there's no need to venture into stormy seas. However, defense-related stocks that can convert U.S.-originated geopolitical risks?including hints at NATO withdrawal?into positive momentum occupy an exceptional position. It's worth noting that Mitsubishi Heavy Industries <7011>, a large-cap stock with a market capitalization of \15.9 trillion, has broken away from its bottom with an upward gap and countercyclical strength.

Beyond the flagship Mitsubishi Heavy Industries, the "big three defense stocks"?Kawasaki Heavy Industries <7012> and IHI <7013>, both made more accessible through stock splits?appear to offer buying opportunities on pullbacks. Additionally, NEC <6701>, positioning itself as a shadow playing manager in defense-related stocks, cannot be overlooked. Other promising small- and mid-cap stocks to watch include Nippon Avionics <6946>, which supplies Mitsubishi Heavy Industries and NEC; HODEN SEIMITSU KAKO KENKYUSHO <6469>, which has strong ties with Mitsubishi Heavy Industries; Howa Machinery <6203>, expected to see significant earnings improvement in the fiscal year ending March 2027; Ishikawa Seisakusho <6208>, with extensive experience supplying the Air and Maritime Self-Defense Forces; and RIKEI <8226>, an IT equipment trading company with abundant delivery experience to the Ministry of Defense.

Tomorrow's schedule includes the Bank of Japan's projection of current account balance factors for April to be disclosed before the morning session opens, and an auction of three-month treasury discount bills during morning trading. During the afternoon session, the BOJ will release "Output Gap and Potential Growth Rate." Overseas, China's Caixin non-manufacturing PMI for March will be announced. In the United States, market attention will focus on the March employment statistics. Note that due to Good Friday, U.S. stock markets as well as markets in Hong Kong, Taiwan, the Philippines, Singapore, Indonesia, India and other Asian countries will be closed.

Source: MINKABU PRESS