Nikkei Sets New Record High on Weak Yen & Slow BoJ Normalization
JPN225 Analysis
The benchmark Japanese index is having another banner year due to structural reforms, strong corporate earnings, market-friendly government policies, favorable monetary policy and devalued Yen. These factors have increased the appeal of Japanese equities not only domestically, but globally as well, as they become cheaper for foreign investors.
The Bank of Japan started to normalize its stance and exited the negative rates regime in March, causing JPN225 to pullback from its record peaks. However, policy remains accommodative and officials have followed a slow and cautious path towards tighter setting. As a result, the Yen has continued to suffer and the benchmark index gained nearly 20% in H1, with foreign investments continuing to pour in.
The rally is extended this month, as JPN225 sets new all-time highs today and has the potential for sustained strength, given the tailwinds described above. On the other hand, the BoJ may be moving slowly towards a less easy stance, but it has signaled lower bond purchases ahead and at least one more hike is reasonable within the year. This shift can eventually support the ailing currency (along with increased risk of FX intervention) and contain the JPN225 advance. On the technical front, the rally is overextended and a pullback below the 40K mark is reasonable. Deeper correction though has a higher degree of difficulty as the downside is well-protected, starting with the EMA200 (black line).
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
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