Record $11.2B Foreign Selloff in Japanese Stocks: The Late June 2025 Crisis Explained

What Caused It: Three Interlocking Triggers

The record selloff was not driven by a single event but by a cascade of catalysts that compounded one another over several weeks.

1. Broadcom's Weak Outlook Starts the Unwind

The selloff began in early June 2025. Semiconductor giant Broadcom issued lackluster revenue projections for the third quarter, falling short of predictions and triggering a selloff on Wall Street's Nasdaq . This sparked an initial rotation out of Asian technology stocks as investors worried that the AI-driven rally had run ahead of fundamentals . The MSCI's Asian tech gauge declined for a fifth session in six, with Samsung and SoftBank among the losers .

2. Global Tech Rout Spreads to Asia

By June 24, a full-blown tech rout had hit global markets. The Nasdaq slumped more than 2% on valuation concerns and persistent worries over huge AI capital outlays . In Asia, South Korea's Kospi suffered the most severe damage, slumping 10% in a single session on heavy selling of chipmakers SK hynix and Samsung . Angelo Kourkafas from Edward Jones described the pullback as prompted by concerns that stock valuations had gotten ahead of themselves and that AI spending outlays might not deliver proportional returns .

3. Apple Price Hikes Ignite Fresh AI Spending Fears

The decisive trigger came on June 26, when Apple announced it would raise prices by up to £300 on some products, explicitly citing rising AI costs . This ignited a fresh wave of selling. Japan's tech-heavy Nikkei dropped 4.2%, and South Korea's Kospi briefly halted trading after falling 5.8% in a single session — two days after already correcting 10% . The Straitstimes reported that Asian technology stocks slumped on concerns that rising component prices would curb demand for devices and eventually slow the memory chip rally that had powered much of the AI trade .

Structural Concern: AI Spending Doubts Intensify

Underlying all three triggers was a persistent structural worry: were the massive capital expenditures on AI infrastructure going to deliver proportionate returns? Throughout late June, the dominant narrative shifted from AI exuberance to "AI bubble fears" . One analyst noted that "the AI frenzy has cooled fast as sky-high valuations run into reality" . Chip stocks led losses across Asia as investors questioned whether aggressive spending on AI hardware, from Broadcom and Oracle to Apple's supply chain, was sustainable .

Domestic Buyers: Only a Partial Cushion

A critical factor that amplified the selloff was the absence of domestic Japanese buyers. Throughout 2025, the rally in Tokyo shares had been fueled primarily by foreign investors, while domestic participants remained on the sidelines . In May 2025, Japanese investors actually made their biggest exit from foreign stocks in five years, repatriating capital due to Middle East tensions and tech-overheat worries . Retail investors in Japan were dumping local stocks at the fastest pace in more than ten years, pushing fresh cash into overseas markets instead . This meant there was no natural domestic bid to absorb the foreign selling pressure, worsening the rout.

Currency Pressures: Yen Strength Compounds the Damage

The yen's appreciation added another layer of pain. A stronger yen erodes the value of foreign-held Japanese equity portfolios and squeezes the earnings of Japan's export-driven tech sector. By mid-June, foreign investors were explicitly citing "yen strength and BoJ shift" as reasons for deepening equity outflows . The Bloomberg-reported outflow of ¥1.5 trillion in September 2024 had similarly been driven by yen jitters, and the pattern repeated in late June 2025 . The currency headwind made foreign investors more inclined to lock in profits and exit, accelerating the record outflow.

Broader Asian Tech Rout

The selloff was not confined to Japan. South Korea's Kospi bore the worst damage — a 10% single-day slump on June 24 — as investors fled chipmakers SK hynix and Samsung . By June 29, another wave hit after Apple's price announcement, with Asian tech stocks slumping again on concerns that rising component costs would curb device demand and slow the memory chip rally that had powered the AI trade . Trading was halted on South Korea's main index twice in the same week as the Kospi tumbled as much as 9% before closing down 5.8% .

Key Factors at a Glance