The Nikkei 225 Index soared to a record high on Monday as investors anticipated a busy market week ahead. It jumped to a high of ¥60,787, much higher than the year-to-date low of ¥50,430. This article looks at some of the top catalysts that will move Japan stocks this week.
Nikkei 225 Index to react to the US-Iran war issues
The main catalyst for the Nikkei 225 Index this week is the progress of the US-Iran war, which has now moved into an open-ended ceasefire arrangement.
In a statement on Saturday, President Donald Trump said that he had canceled the trip to Pakistan by his representatives as it became clear that the Iranians will not show up.
Iranians have resisted meeting with the US as the US government continues the blockade. As a result, crude oil prices continued rising, with Brent reaching a high of $107 on Monday. Japanese companies are highly exposed to these prices because the country imports most of its energy from the Middle East.
Bank of Japan interest rate decision
The other main catalyst for the Nikkei 225 Index is the upcoming Bank of Japan interest rate decision that comes on Tuesday this week.
Economists polled by Reuters expect the bank to leave interest rates uncharted at the 30 year high of 0.75%. Officials will justify the rate decision as a way to observe the impact of the war on inflation.
Still, analysts expect that the bank will ultimately hike interest rates by 0.25% later this year as the International Monetary Fund (IMF) has requested. This explains why the short-term Japanese government bonds have soared recently.
In addition to the BoJ decision, the upcoming Federal Reserve interest rate decision will have an impact on the index. A dovish tilt will likely push the index higher.
Top Japanese earnings
Meanwhile, some important Japanese companies will publish their financial results this week. The most notable of them are the sogo-shoshas, which Warren Buffett has invested in. This includes companies like Mitsubishi, Mitsui, Marubeni, Sumitomo, and Itochu that will release their numbers on Friday.
More large companies like Tokyo Electron, Toyota Tsusho, Hoya, Murata Engineering, Mitsubishi Electric, Fujitsu, and Komatsu will publish their latest results this week. Strong corporate earnings will be highly bullish for the index.
In addition to this, the index will react to the US earnings season, which will accelerate this week with companies like Microsoft, Google, Apple, and Meta Platforms releasing their results.
Nikkei 225 Index technical analysis
NI225 Index chart | Source: TradingView
The daily timeframe chart shows that the Nikkei 225 Index has made a strong bullish breakout recently and is now hovering at its highest point on record. It has already moved above the key resistance level at ¥59,297, confirming the cup-and-handle pattern.
The index remains above all moving averages and the strong pivot reverse of the Murrey Math Lines tool. Therefore, the next key resistance level to watch will be at the ultimate resistance at ¥62,500.
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