JPN225 Finds Support after the BoJ-Fueled Slump
JPN225 Analysis
The Japanese benchmark index was having another blockbuster year that culminated to record highs at the start of July, with ultra-loose monetary setting and devalued Yen, being the key culprits behind the protracted rally.
Even though the Bank of Japan had started normalizing policy in March, it had followed a slow and cautious path that sustained those forces. Last week however, policymakers bolstered their normalization efforts as they hiked rates for second time in this cycle, pointed to more moves ahead and also announced a significant reduction to their bond buying scheme.
The more forceful action towards less easy stance sent the Yen higher and threatens to deprive two key forces behind the stock market's advance. JPN225 unraveled after the decision and the fall was aggravated by the US growth scare after the soft jobs report, erasing more than 10% in just three days and closing two of them in bear market zone. It is now vulnerable to further losses toward and beyond 30,290.
On the other hand, the appeal of Japanese equities goes beyond favorable monetary conditions and weak Yen. It is rooted in structural reforms to boost valuations and dividends and investor friendly government policies. Furthermore, the central bank remains accommodative and the market rout will likely create apprehension around more hikes. In an effort to calm markets, Deputy Governor Uchinda downplayed prospects of further tightening, saying that the central bank "will not raise" interest rates "when financial and capital markets are unstable". [1]
This has helped JPN225 cover some of the lost ground and provides the opportunity for further rebound. However, the upside is unfriendly with a significant cluster of hurdles form the 200Days EMA (blue line) onwards.
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.
References
| Retrieved 17 Apr 2026 https://www.boj.or.jp/en/about/press/koen_2024/data/ko240807a1.pdf |
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.