The Nikkei 225 broke above a triangular consolidation pattern, creating an environment in which the possibility of a further move higher is being reassessed. The easing of three concerns, US employment and inflation indicators, the situation in the Middle East and oil prices, and concerns over AI investment, is being cited as a positive factor for Japanese stocks.
The Nikkei 225 broke above a triangular consolidation pattern last week, and the market is now focused on whether it can test higher levels. The economy and corporate earnings are performing well, and positive factors are accumulating ahead of the July–September earnings announcements.
The factors identified as three concerns are each viewed as having eased somewhat. Some observers point to relatively weaker concerns over US employment and inflation indicators, as well as reduced uncertainty over the outlook for the situation in the Middle East.
WTI crude oil futures briefly rose above $100 but have since fallen to around $91. Although uncertainty remains in the oil market, this may have contributed to easing inflationary pressure.
The contribution of AI-related investment to earnings is beginning to emerge, and the revenue contribution from cloud businesses is becoming more apparent. Some market participants say this has somewhat reduced concerns about excessive investment. The Bank of Japan Tankan DI for large companies was also strong, prompting expectations that July–September earnings will be relatively solid.
For Japanese equity investment, the end of the sharp sell-off triggered by rising interest rates cannot yet be confirmed. The strategy of increasing positions in undervalued stocks while spreading purchases over time is expected to continue.