Middle East tensions and currency volatility have caused Japan's record stock rally to falter, but the weakness looks temporary as solid corporate fundamentals and the long-term outlook for artificial intelligence provide support. That's the view of Koji Nakatsuka, chief investment officer for Japan equity at Allianz Global Investors, which manages 2.4 trillion in assets globally. "If everything gets normalized, the Japanese stock market has an upside potential toward the end of the year. The Nikkei may return to its record high levels by year-end," he said. Japanese stocks have come close to a technical correction after surging to all-times highs earlier this year, as traders slashed bets on the Federal Reserve's interest rate cuts.

SMBC Nikko Securities Inc. said it will launch a service Friday to advise individual customers on investment in Japanese stocks utilizing artificial intelligence. The unit of Sumitomo Mitsui Financial Group Inc. hopes to gain a wide range of customers, including novice investors, through the online service designed to propose an optimum asset management method. SMBC Nikko will operate the service jointly with Japanese AI technology developer Heroz Inc. The AI-based service will show stock prices expected a month ahead of all firms listed on Japanese stock exchanges for more than one year, based on their earnings data and daily stock price movements. It will propose the best portfolios for customers according to how much loss they can accept.