Japanese stocks are expected to rise toward year-end despite the ongoing increases in oil prices and interest rates and a correction in AI and semiconductor stocks.
While the tendency for U.S. stocks to rise toward year-end is encouraging, the triple whammy of high oil prices, high interest rates and a correction in AI and semiconductor stocks is unsettling investors. There is a view that corporate earnings can maintain their strong ability to absorb these pressures, but movements in oil prices and the 10-year government bond yields of Japan and the United States are being watched as key factors.
Crude oil prices are determined not only by geopolitics but also by demand and supply. Demand is slowing, and the IEA has cut its global demand forecast by 2.5 million barrels per day. With China’s manufacturing PMI below 50 and the weakness of the European economy persisting, some believe that prices would fall on their own through demand destruction if they exceeded $110.
On the supply side, U.S. crude oil production is forecast to reach a record 14.3 million barrels per day from 2023 onward, while shale producers are expected to ramp up production more actively when prices rise. This could offset the impact of OPEC+ production restraint, and some believe that around $108.66 would be a reasonable level even if prices rise above their current range.
The BOJ’s money stock and broad liquidity are cited as factors supporting a year-end rise in Japanese stocks. August money stock was up 1.2% year on year at approximately ¥1,640 trillion. Broad liquidity rose 4.4% to ¥2,342 trillion, a record high. Assuming EPS of ¥4,000 and a PER of 18x, the Nikkei Average is projected to reach 72,000 by year-end.