The Tokyo stock market on the 8th saw the Nikkei Stock Average surge \2,878 to 56,308, marking a substantial gain and its fourth consecutive day of advance ? a stunning rally by any measure. While an extension of the ceasefire negotiation deadline had already been seen as likely, when President Trump officially announced a two-week postponement of large-scale military action against Iran, the Tokyo market turned overwhelmingly risk-on in textbook fashion. It was an all-too-predictable TACO (Trump Announcement Causes Optimism) trade, but one that followed a clear script. The sequence began when Pakistani Prime Minister Sharif requested via social media that President Trump extend the negotiation deadline by two weeks, and Trump relented in response. It may sound theatrical, but this pre-arranged scenario appears to have been set in motion early on.

This is evidenced by the previous day's U.S. stock market, where the Dow Jones fell more than 450 points in morning trading but subsequently held firm as if anticipating Trump's change of heart, then rapidly recovered toward the close. Both the Nasdaq Composite and the S&P 500 turned positive just before the close and ended the session in the green. The current Middle East crisis appears to have reached a peak of war-weariness ? not only for Iran, but for the United States as well. Yet both sides found themselves unable to back down for the sake of saving face. Trump signaled willingness to agree to a ceasefire on the condition of opening the Strait of Hormuz ? effectively forgiving Iran ? but Iran raised the condition of imposing transit fees, which Trump accepted, making this game of chicken effectively a victory for Iran. While the U.S. avoided paying reparations to Iran, the posture of shifting the cost of a war launched with the intention of seizing Iranian oil resources ? a campaign that did not go as planned ? onto Japan and other Asian nations does considerable damage to American credibility.

Moreover, the U.S. attack on Iran in coordination with Israel, while framed as preventing nuclear armament, casts the United States not as a global "policeman" but as a "plunderer" engaged in forceful resource acquisition. Even if the benefit of a temporary ceasefire is achieved, this falls short of war termination. While the Tokyo market benefited from the TACO trade today, the \2,900 surge in the Nikkei Average has no bearing on corporate fundamentals, and it is unrealistic to expect the upward trend to continue once short-covering runs its course.

Behind Iran stand China and Russia, giving this conflict a strong proxy war dimension that extends well beyond a simple Middle East crisis ? and this is certainly not a distant war for Japan. If not immediately, it could potentially ignite scenarios such as a Chinese contingency over Taiwan. Would the United States make a full effort to prevent that? The possibility of a major Republican defeat in the November U.S. midterm elections has grown more realistic given President Trump's erratic course. The Chinese classic "Romance of the Three Kingdoms" records Zhuge Liang's famous saying: "Govern with great virtue, not with small favors." Trump's tariffs and resource-driven military campaigns likely fall squarely into the category of small favors for the U.S. economy and the American people. Politics divorced from great virtue cannot constitute America First. Prime Minister Takaichi Sanae, who must look beyond the Trump administration, will likely face difficult navigation ahead.

Setting aside the big picture, there were significant moves in individual stocks today. Kioxia Holdings gapped up at the open, surging to a new post-listing high on record trading volume exceeding \1.35 trillion, while Furukawa Electric <5801> has emerged as a new standout in AI infrastructure buildout. In contrast, Shin-Etsu Chemical <4063> was a notable underperformer despite being the world's top producer of semiconductor silicon wafers, likely weighed down by concerns over headwinds in its PVC resin division. That said, the company also has rare earth exposure, and the stock looks attractive on dips. Among other semiconductor-related names, AIMECHATEC <6227>, which handles semiconductor packaging equipment, appears well-positioned at current levels following its post-split reset.

Attention should also be paid to sectors beyond semiconductors. With the fiscal 2026 budget passed at the Upper House plenary session on the 7th, construction-related stocks poised to benefit from full-scale national resilience initiatives merit attention now. Beyond the major general contractors, DAIHO <1822> and ASANUMA <1852> appear to offer attractive entry points. OHMORI <1844>, which staged a major rally last year, also deserves renewed attention.

On tomorrow's schedule, weekly cross-border securities transaction data will be released before the morning session opens, and auctions for 6-month Treasury bills and 5-year government bonds will be held during morning trading. March office vacancy rates will also be announced. During afternoon trading, the March consumer confidence survey will be released, with March machine tool orders ? due after 3:00 p.m. ? also drawing keen interest. One IPO is scheduled for the day, with Softex <550A> newly listing on the TSE Standard and Nagoya Main markets. Overseas, Poland's central bank will announce its policy rate, while the United States will see a series of key data releases including weekly initial jobless claims, February personal income and personal consumption expenditures (PCE deflator), and February wholesale inventories and sales. An auction for 30-year U.S. Treasury bonds is also on the calendar.

Source: MINKABU PRESS

*Translated by generative AI. Click here for the original article.