Kioxia and Sandisk said Thursday they intend to spend roughly ¥5 trillion, more than $31 billion, in Japan through 2032 to expand flash memory production at the Yokkaichi and Kitakami plants. Kioxia said separately that it has begun site preparation for a third fabrication building at Kitakami. Hiroo Ota carried the plan to Prime Minister Sanae Takaichi’s office in person. The wires ran it as a capacity announcement. The two qualifiers attached to it are more informative than the headline number: the spending is contingent on support from the Japanese government, and Fab3 is not expected to begin operations until fiscal 2029.

Japan built the modern semiconductor industry. By the mid-1980s it held more than half of global DRAM market share and was the presumptive long-term dominant force in chip manufacturing. Within two decades that position had been absorbed almost entirely by Taiwan and South Korea. The transfer of leadership was not the result of a single competitive reversal. It was structural, compounding, and in several respects self-inflicted.

The 1986 Trade Agreement

The proximate wound arrived through policy. The US-Japan Semiconductor Trade Agreement of 1986 set floor prices on Japanese chip exports and required that foreign companies reach a 20% share of the Japanese domestic market. Washington framed it as reciprocity. The practical effect was to hand American and Korean competitors a margin-protected breathing window at exactly the moment when fab investment requirements were beginning to escalate sharply. TSMC was founded the following year. The timing was not a coincidence — the agreement had altered the risk calculus for a pure-play foundry model that Japan had dismissed and the US had reason to encourage.

The Nikkei 225 closed at 64,142 on May 24, up roughly 7% from the level it held before May 21. Four sessions. The move was not random volatility — it was the convergence of three distinct catalysts arriving simultaneously on a market that had already been building one of the strongest year-to-date performances among major global benchmarks.

May 21: The Session That Started It

On May 21 the Nikkei surged 3.14%, its strongest single session in months. Three forces drove it. Nvidia’s earnings had confirmed that AI infrastructure demand was not decelerating, sending technology stocks higher across every market that touched the sector. Separately, progress in US-Iran peace negotiations shifted global risk sentiment in a direction that favored equity markets broadly. And SoftBank Group gained 19.85% in a single day, making it the dominant contributor to the index’s point advance by a wide margin. SoftBank is price-weighted in the Nikkei, which amplifies its directional influence relative to its market capitalization weight. The broader Topix gained approximately 1.6% on the same session, confirming the advance had breadth beyond the SoftBank effect.