JPN225 Narrowly Avoids Another Losing Month, but Correction Could Persist

  • JPN225
    (${instrument.percentChange}%)

JPN225 Analysis

The benchmark Japanese index surpassed the 1989 peak to set new all-time highs earlier this year, in a rally partly fueled by the central bank's ultra-loose policies (in contrast with its major counterparts) and the Yen's collapse that made Japanese stocks cheaper for foreign investors. However, the BoJ raised rates out of negative territory in a landmark decision in March and is likely to hike again this year, in a policy shift that could weigh on the stock market. Comparisons with 1989 also offer reasons for concern, as the Nikkei went into a prolonged decline after that record high, while the central bank raised rates by 3.5% in just over a year.

JPN225 losses ground this quarter as it pulls back from its March record and the monetary policy shift creates scope for deeper correction towards the broader 36K region (200Days EMA), although further weakness has a higher degree of difficulty. The index however shows resiliency to the headwinds and managed to avoid a back-to-back negative month, even if narrowly. Bulls have the ability to push higher and challenge the record high (41,227).

The Bank of Japan may have started normalizing its policy, but retains an accommodative stance, while the Yen's demise persists. Furthermore, the rally of the stock markets is a attributed to a wider range of factors that can continue to spur growth, such as structural reforms, favorable policies by the government and strong corporate earnings.

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. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

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