With the FOMC and the Bank of Japan meeting scheduled for the same week, movements in the SOX index, higher crude oil prices and the yen exchange rate could determine the direction of the Nikkei, according to reports. Against the backdrop of the impact of monetary policy in Japan and the United States and developments in the Middle East, attention is focused on the Nikkei's direction.
First, amid the approaching FOMC and Bank of Japan meeting in the same week, the view has been expressed that higher crude oil prices and movements in the yen exchange rate will determine the Nikkei's performance. Although a policy rate hike is expected in Japan on 18 September, the pace of additional rate hikes is reportedly likely to be the focus, while developments in the yen's appreciation or depreciation and interest rate differentials could affect interest rate trends in Japan and the United States. In addition, rising WTI crude oil futures are cited as a factor that could increase inflationary pressure and potentially weigh on the Nikkei.
Next, an analysis using charts points out that a comparison of movements in the SOX index, crude oil and dollar-yen with the Nikkei shows that the Nikkei tends to move broadly in line with the SOX index, while there are times when it is more prone to decline as crude oil prices rise or the yen strengthens. The TOPIX is reportedly less vulnerable to a relative decline because of shifts in funds between sectors, including bank and trading company stocks, and sector rotation is said to be helping limit the Nikkei's decline.
Finally, as potential investment ideas, the view has been expressed that interest rate trends in Japan and the United States and crude oil price movements will continue to have an impact, and strategies such as a long position in TOPIX futures combined with Nikkei 225 futures may be considered. If there is a view that negative factors have already been priced in, investors may also seek a rebound through ETFs linked to the Nikkei, among other instruments.