The Nikkei 225 index continues its upward trajectory, recording a new all-time high of 59,688 points yesterday. The index has risen by about 16% since the beginning of the year, outperforming U.S., European, and Chinese indices. However, it still lags behind South Korea’s Kospi index, which has surged by around 47% since the start of the year. In addition, the Topix index has also increased by about 11% since the beginning of the year.
This notable rise in Japanese equities is attributed to several factors, most notably the easing of geopolitical tensions in the Middle East. Japan is one of the largest importers of crude oil, and therefore any optimism or ceasefire between the parties involved in the conflict, as well as any progress regarding the Strait of Hormuz, tends to have a positive impact on Japan, particularly with the decline in crude oil prices.
This upward momentum is also supported by Japanese Prime Minister Sanae Takaichi, who advocates expansionary fiscal policies that encourage higher government spending, easier borrowing, and tax cuts, particularly on food products, in an effort to revive the stagnant economy.
Japanese markets have also witnessed strong foreign investment inflows into equities during this week. In addition, the weakness of the Japanese yen has supported the markets, as the currency recently surpassed the level of 160 yen per U.S. dollar, its highest level since July 2024, encouraging foreign investors to inject more capital into Japanese markets.
From a technical perspective, indicators suggest that the Nikkei 225 may continue its upward movement for several reasons. There is a convergence between the 20-day moving average and the 50-day moving average, and any bullish or golden crossover between them may signal a continuation of the upward trend in the coming period.
The Relative Strength Index (RSI) currently stands at 62, indicating bullish momentum for the index.
The MACD indicator also shows a bullish crossover between the MACD line and the signal line, which reinforces the positive momentum of the Nikkei 225 index.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
