The Tokyo market is expected to lack a clear direction next week ahead of the FOMC and the Bank of Japan's monetary policy meeting. The main focus will be the US August CPI report, due on the 11th, which is expected to influence the decision on whether to raise rates in September.
The Nikkei is likely to see greater volatility week on week next week, with the market's direction expected to be determined by the CPI report as investors await the US FOMC and the Bank of Japan's monetary policy meeting. The prevailing view in this article is that the US August CPI report will be the decisive indicator.
The Nikkei ended this week at ¥65,020.94, falling for 4 consecutive trading days through the 3rd. Tensions in the Middle East and rising US long-term interest rates weighed on the market, while a rebound emerged toward the end of the week against a backdrop of lower long-term interest rates. Fund flows into AI and semiconductor-related stocks created swings in the market, while overall conditions remained unstable.
The US employment report had a major impact on the market's direction. August nonfarm payrolls increased by 162,000 from the previous month, far exceeding market expectations and reviving expectations of a rate hike. The unemployment rate was unchanged at 4.1%. US stocks fell and market expectations for a September rate hike rose again, but slower wage growth showed signs of moderation and did not prove decisive.
US markets will be closed for Labor Day on the 7th next week, and several days are expected to offer few market cues. Meanwhile, important events are scheduled, including domestic and overseas economic data releases, a meeting of the ECB Governing Council and a Bank of Japan policy meeting. The Nikkei may enter a phase of looking for opportunities to buy on dips, while its direction is expected to be reassessed depending on developments toward the end of the week and the CPI report.