According to an analyst report by Imamura Securities, Japanese equities continue to face resistance on the upside. Meanwhile, the Hokuriku economy is gradually recovering, and attention is also focused on developments in AI- and semiconductor-related sectors.
Japanese equities continue to face resistance on the upside. The Nikkei 225 has been trading in the ¥63,000–¥66,000 range, with rising long-term interest rates and developments in AI- and semiconductor-related stocks weighing on the market. Against a backdrop of rising US interest rates, concerns over stretched valuations have emerged, while the SOX Index has also remained weak recently.
Resilient corporate earnings are providing support. Companies with fiscal years ending in March are expected to post higher net income in the fiscal year ending March 2027, and expectations for upside earnings surprises are emerging as export companies' assumed exchange rates are generally centered on ¥145–¥155 to the dollar. Earnings announcements from late October onward will be closely watched.
The US, European and Japanese monetary policy meetings scheduled for late October are also viewed as potential market drivers. While expectations for another rise in US interest rates are increasing, the possibility of a shift in the Bank of Japan's policy stance is also being discussed, raising concerns that further yen depreciation could reignite inflationary pressure. The market is also expected to enter periods in which expectations for higher terminal rates intensify.
Developments surrounding the situation in the Middle East could affect oil prices and economic sentiment. US President Trump has indicated that he expects hostilities to end after the November midterm elections. If a path toward an end to the fighting emerges, oil prices could fall and funds could flow into growth stocks.
The Hokuriku economy is generally firm. Personal consumption recovered in July, rising 1.7% year on year, with strong sales of jewelry at department stores, as well as sales at large electronics retailers and drugstores. Industrial production fell 2.6% month on month on a preliminary basis, but rose 6.7% year on year, marking an increase for the eighth consecutive month.
Economic sentiment is improving. Hokuriku's BSI improved to -4.2 in the July–September quarter, while orders for AI, semiconductors, automobiles and construction machinery are picking up. The impact of the situation in the Middle East, foreign exchange rates and energy prices will require continued attention.