The Nikkei Average entered a correction phase from its record high and fell to ¥57,434 on 6 November. The correction may be progressing, based on updated estimates and increased market volatility.
After pointing out in its report dated 24 June that a healthy correction, referred to as a “healthy correction,” could occur, the Nikkei Average reached a record high but subsequently fell to ¥57,434, recording a correction of approximately 20.6% from its peak. The correction phase continued until it was reported again on 6 November.
There are 2 new estimates: Estimate 1 extends the data used in the previous estimate, while Estimate 2 uses log differences to avoid the appearance of correlation. The accuracy of the forecasts against actual results was almost unchanged for both, suggesting that the Nikkei Average's rise above ¥70,000 during the summer may have been an overshoot.
Regarding the relationship between the Nikkei Average and nominal GDP, views have been expressed that rising growth expectations and the impact of the AI boom drove the increase in the Nikkei Average. Since 2025, it has risen at a pace that to some extent exceeded nominal GDP growth. After the correction, it may return to an uptrend in line with nominal GDP growth, but it remains uncertain whether this accurately reflected the future outlook, and future developments remain uncertain.
Market fluctuations remain severe, and the standard deviation of the Nikkei Average's daily change has expanded sharply since the start of this year. While this suggests that the correction could be prolonged, the impact of excessive pricing-in of growth expectations related to AI will need to be assessed. Investors are expected to remain prepared for elevated price volatility risk.