The Nikkei Stock Average has fallen sharply, while the Nikkei VI remains at a high level. Simultaneous spikes in the Nikkei VI and VIX, along with trends in other volatility indicators including VXN and OVX, are being highlighted as leading indicators for the Japanese market.
The Nikkei Stock Average has fallen sharply and is expected to remain in a high-price range over the longer term, but the Nikkei VI remains at a high level. Factors cited as increasing uncertainty over the outlook include instability in US-China relations and the situation in the Middle East, elevated crude oil prices, global inflation and interest-rate trends, and movements in AI- and semiconductor-related stocks.
There have been periods in the stock market when the Nikkei VI and VIX spiked simultaneously, and past examples show both indicators surging during sharp market declines. These movements attract attention as leading indicators for the Nikkei Stock Average, although some views suggest that conventional benchmarks are less reliable now that the Nikkei VI has become persistently high.
The Nikkei Stock Average has tended to rise during periods when OVX declines, while a rise in VXN is said to raise the possibility of weakness in the Nikkei. Cases in which easing concerns over crude oil prices led to gains in the Nikkei are also cited, and using OVX and VXN together as supplementary indicators has been proposed.
In summary, spikes in the Nikkei VI and VIX have limited value as advance signals, but periods when the Nikkei VI exceeds 50 may serve as a guide for deploying cash on the sidelines. VXN and OVX may play a supplementary role as indicators reflecting external factors affecting the Japanese market. Comprehensive decisions based on a combination of multiple indicators and fundamentals are important.