The rise in crude oil prices and the impact of US economic data have been cited as factors behind the Nikkei Stock Average's sharp decline over the past week, with seasonal patterns also drawing attention. The outlook includes forecasts for the level 12 months ahead and for key indicators.
Last week, the Nikkei Stock Average fell 5.4%, or ¥3,706, amid a global stock-market decline. Persistently high crude oil prices and a US consumer price index reading above expectations raised concerns about higher short- and long-term interest rates. Japanese stocks were sold, led by AI- and semiconductor-related names. The decline in the SOX Index was also significant.
Even so, Taiwan's export orders, Japan's machinery orders and South Korea's export value, which the author monitors regularly, have remained strong, prompting some to question the recent decline. Higher interest rates are seen by some as reducing the appeal of equities and raising concerns about a slowdown in AI-related investment, while others point to the strong influence of supply-and-demand factors.
The Nikkei Stock Average has shown a tendency to be weak in summer and strong in winter. Historical monthly return data suggests that October is generally weak, November tends to recover somewhat, and December tends to strengthen. The same pattern can be seen in seasonally adjusted data.
The seasonal fluctuations may be related to seasonal factors in employment statistics, and employment growth in October 2026 is considered likely to accelerate.
Over the medium to long term, the Nikkei Stock Average is expected to reach around ¥72,000 over the next 12 months, USD/JPY around ¥155, and the Bank of Japan's policy rate 1.5% in December and around 2.25% by the end of 2027. The Fed funds rate is expected to remain at 4.0% through the end of the year.