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Nikkei boost on weakening yen

Japanese stocks have been edging up since the Jackson Hole Symposium, when the Bank of Japan signalled a ‘lower for longer’ stance and potentially more monetary easing ahead.

Japan data board
Source: Blommberg

Japanese stocks have been edging up since the Jackson Hole Symposium, when the Bank of Japan signalled a ‘lower for longer’ stance and potentially more monetary easing ahead.

The Nikkei 225 looks likely to stay the course with the lack of strong leads until Friday, when we’re due to get a huge round of 14 pieces of Japanese macro data.

So far this week, volumes have been 20% below the daily average, reflecting the relatively quiet sessions across the region which could translate into slightly more choppy sessions ahead.

One key data point to watch out for on Friday is the CPI for July. Stripping out the effects of April’s consumption tax hike, June’s inflation rate was only 1.3% - still some way below the 2% inflation rate target.

A disappointing reading will likely be a positive for USD/JPY and Japanese stocks, especially the exporters as it would accelerate any easing measures.

Another indicator is the industrial production estimates for July, which is expected to improve month-on-month. The market consensus is for a print of a 1% increase, after June dropped to -3.4%. The year-on-year figure is expected to slip to -0.1%, after rising 3.1% last July. Any miss in expectations could also spur the yen to weaken further.

The Nikkei is currently on an uptrend and could test its resistance level of around 15,760 points. More conservative traders could look at a retracement towards the 15,477 level for an entry.

Japan 225 Cash Chart
Click to enlarge

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