All trading involves risk. Losses can exceed deposits.

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.

All trading involves risk. Losses can exceed deposits.
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.

Click to enlarge

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.