Japan's Nikkei edges higher on weaker yen before Nvidia earnings

Nvidia earnings: Japan's Nikkei share average closed higher on Wednesday amid a weaker yen, but earnings from AI darling Nvidia later in the day kept investors cautious.

The Nikkei ended up 0.22 per cent at 38,371.76, reversing early declines, as the yen extended its slide against the dollar over the course of the session.

That put the index close to the top of its narrow range since mid-month, which has been anchored around the psychological 38,000 mark.

The broader Topix slipped 0.08 per cent.

Market expectations for Nvidia's financial report are sky-high, and anything short of a stellar forecast from the chipmaker could jolt investor confidence in the AI-fuelled rally.

"The bar is extremely high, and depending on the result, stocks could swing wildly", which kept Japanese investors largely sidelined, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

Semiconductor-sector shares were mixed, with chip-testing equipment maker and Nvidia supplier Advantest rising 4.18 per cent to be the Nikkei's biggest gainer by index points. Peer Lasertec climbed 4.19 per cent.

At the same time, chip-testing machinery giant Tokyo Electron finished slightly lower, while AI-focused startup investor SoftBank Group slumped 2.29 per cent.

The yen traded about 0.4 per cent weaker at 144.47 per dollar JPY=EBS as of 0611 GMT, reversing course after starting the day by extending overnight gains to 143.69. On Aug. 15, it traded closer to 150 per dollar.

A stronger yen reduces the value of overseas sales, while also making stocks more expensive for overseas investors.

"Even though the yen is weakening a little now, the trend is for gradual yen appreciation, which is a weight on stocks," Ichikawa said.

Automaker shares were mixed, with Toyota Motor rallying 3.88 per cent and Honda advancing 0.7 per cent, while Nissan slid 0.65 per cent and Mazda eased 0.16 per cent.

Rakuten Group led gainers on the Nikkei, jumping 9.19 per cent, following share price target upgrades by Morgan Stanley MUFG Securities and Citi.