Nikkei225 surpasses ‘Historic Milestone’ on mixed inflation sign

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On Friday, the rising sun market surpassed a significant milestone at 38,957.44 points, surpassing the 1989 trading level, just before the so-called "Lost Decade". During the period from 1991 to 2001, Japan experienced economic stagnation and price deflation, from which it emerged, albeit at a slower pace compared to other industrialized nations. In terms of core (year-on-year) inflation, Japan has maintained levels above the Bank of Japan's 2% target since November 2022, reaching a peak of 4.3% in September 2023, the highest in 42 years. However, a softening has been observed in December to 3.7%, with forecasts suggesting a further drop to 3.2% in January 2024, following 20 years of economic policies known as "Abenomics". This trend has led to a slight depreciation of the yen against the dollar (JPYUSD), especially following data on Japanese inflation, projected at 1.8% next Tuesday versus 2.6% previously. This outlook could reinforce the anti-easing stance of the Bank of Japan, the most reluctant and cautious among central banks in developed markets.

As for the 30-year Japanese Bond, a slight revaluation of 0.72% has been observed, coinciding with US bank data that pushed the index to highs. Rebound levels are at 33,905.71 and 30,509.91 points, with key support at 24,396.24 points, reached in March. Japanese tapering policies are likely to continue to underpin the index higher as the country's debt is reduced. In the long term, an uptrend is expected, although a prior adjustment around 39,636.65 points is not ruled out. Currently, the RSI indicator points to an overbought level of 75.05%, which could indicate the need for an adjustment in the short term to form the aforementioned rebound.

Ion Jauregui - AT Analyst




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