With Japanese and US monetary policy events ahead, the market is looking toward a rebound this week following last week's sharp decline. While higher oil prices and heightened tensions in the Middle East persist, the Bank of Japan's actions will also be a key market focus.
Japanese stocks fell last week, with the Nikkei 225 ending trading ¥1,009.60 lower than the previous weekend at ¥64,011.34. The market rose sharply on buying at the start of the week, but major US indexes fell after stronger-than-expected employment data. Some semiconductor stocks rose against the broader trend, while AI-related stocks led gains. Meanwhile, crude oil prices rose as tensions in the Middle East intensified, and risk aversion prevailed in the latter half of the week, increasing downward pressure.
The dollar-yen exchange rate also fell at times in the first half of the week, weighing on the market. Midweek, TSMC's strong monthly sales were viewed as a positive catalyst, lifting South Korean semiconductor stocks and spreading buying to domestic names. However, the market fell sharply again at the end of the week, with the decline temporarily exceeding ¥2,000.
This week, Japan and the US are scheduled to hold monetary policy events. In particular, the US FOMC meeting on the 15th-16th is widely expected to result in a rate hike. The impact on markets could be significant depending on the CPI results, although some believe the impact would be limited even if the rate hike is deferred.
The Bank of Japan's monetary policy meeting is considered likely to have a relatively limited market impact, and an additional rate hike for the first time in 3 months is widely viewed as almost certain. Further rate hikes toward the estimated median neutral rate of 1.75%, as well as additional hikes thereafter, are anticipated. However, the possibility remains that yen appreciation pressure could intensify depending on developments in the US.