Tokyo markets next week will face overlapping month-end supply-demand factors and key economic data from Japan and the US, with the BOJ Tankan survey, the US core PCE deflator and the US employment report due for release, concentrating market-moving factors around expectations for year-end rate hikes.
Next week, from 28 September to 2 October, dividend-reinvestment-related futures buying, Nikkei 225 rebalancing, the US core PCE deflator and the employment report are among the events scheduled in succession. Tokyo markets are expected to be influenced by month-end supply-demand factors and key US economic indicators, with the direction of monetary policy in Japan and the US the main focus. The Nikkei 225 is expected to trade between ¥64,500 and ¥68,000.
Dividend-reinvestment buying is expected to emerge amid month-end supply-demand conditions, affecting the performance of Nikkei 225 futures. In particular, buying demand of approximately ¥300 billion is anticipated from cap adjustments involving Advantest, with supply-demand conditions expected to change around the final cum-rights trading date at the end of September.
Long-term interest rates in both Japan and the US are continuing to trend higher, while equity markets may remain firm. However, depending on developments in the Middle East, interest-rate volatility could increase, and there may be periods of dip-buying in the near term. The dollar-yen exchange rate may remain elevated, although some market participants expect gains to be capped by concerns about intervention.
The release of the BOJ Tankan survey, the US core PCE deflator and the US employment report will draw market attention as indicators of additional monetary policy decisions and the momentum of inflation. A strong US employment report could revive inflation concerns and strengthen expectations for additional rate hikes.