The Tokyo market is expected to grow increasingly cautious this week amid heightened concern over interest-rate trends. Trading is likely to focus on the Nikkei 225's expected range and key upcoming indicators and events.
The Tokyo stock market remained highly sensitive to developments in the bond market this week. As Japan's long-term interest rate rose into the 3% range, the Nikkei 225 briefly fell below ¥64,000, and a cautious mood is expected to spread further next week.
Looking ahead to next week, the projected range for the Nikkei 225 was set at ¥63,500-¥66,500, with concern over rising interest rates identified as a factor that could cap any recovery in the market. Tensions in the Middle East continue to intersect with views seen as fiscally dovish and close to the BOJ.
Regarding BOJ policy, some market participants believe another rate hike following June's increase is highly likely, with a 0.5 percentage-point hike under discussion. The market's interpretation could also shift in response to comments from BOJ policy board members.
The U.S. employment report, CPI and revised GDP reading are due this week and could affect the probability of a Fed rate hike and market expectations for interest rates. U.S. events next week and the European Council meeting will also be watched by equity markets. Furukawa Electric and other next-generation data center stocks are also expected to attract interest.