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  • Emerging markets and China’s distressed prices were reduced over Japan.
  • Japan is considered a defensive play because its market value is lower than the rest of the world.
  • The Nikkei 225 has been in a long uptrend since March 2009.


Japan’s stock market in the US has been declining since Japan’s economic boom in the early 1990s led to two years of deflation. Although, the implementation of “Abenomics” in December 2012; A strong combination of monetary and fiscal policy expansion led to a 150% gain seen in the Nikkei 225 until the end of 2022, which is still 36% below its peak of 38,957 was hit in December 1989 before the eruption. of the stock market from its current level of 28,590 at the time of writing.

Why is this time different?

Let’s take a trip down memory lane. The underperformance of Japanese stocks against the rest of the world since the 1990s has been attributed to two main factors; local population where Japan’s birthrate has declined faster than its aging population has lowered productivity.


Second, China’s entry into the World Trade Organization in December 2001 started a two-year period in the world that saw the emergence and prosperity of a new investment class, markets that stand It dates back to the 1980s before Japan’s electric power system took over.

Fast forward to today, the world is in a very different place; The world has broken since the US-China trade war carried out by the Trump administration in 2018, and under the current Biden administration, the conflict between the two superpowers has continued, this time the “battle” of high-performance semiconductors. chips.

The result of the “conflict” between the United States and China has led to the collapse of the world and the “emerging client in the crisis markets” sought by the investors of the world has reduced or decreased. Also, China is facing an aging population crisis where its population is expected to drop to a level below the number of deaths by 2022, the first time this has happened since the 1960s.

Therefore, the margin enjoyed by China and emerging markets over Japan may take a back seat.

Japan’s central bank, BoJ may be forced to adjust its ultra-easy monetary policy

On December 20, the BoJ made a significant change to the controlled bandwidth of its yield curve control (YCC) policy; Another type of “creative” quantitative easing program was introduced in September 2016. The revision of the YCC policy has now allowed the 10-year JGB bond to move 50 basis points in either side of the target 0%, wider than the first 25. basic level.

This “step-up” tweak is a precursor to an interest rate hike in 2023 by the BoJ as it eases its decade-long ultra-loose monetary policy in Japan due to growth inflationary increase where inflation has increased. well above 2% year-on-year (the central bank’s target) for several months apart from April 2022.

Since the prices of financial instruments are determined in the market by a large part of sentiment and fear, therefore, a small policy adjustment or tweak can cause a volatile effect. in international financial markets.

Also, bearing in mind that Japanese companies (both financial and non-financial) are among the top investors in the world and are looking to invest abroad to gain better returns, and those cash flows to begin with. reflows to Japan due to adjustments in domestic monetary policy.

For example, foreign fixed incomes tend to be lower than Japanese equivalents, thus making foreign investments less attractive for Japanese companies on a fixed income basis. Therefore, it can generate a positive feedback in the Japanese market.

Japan’s stock market may be considered a defensive play

Source: TradingView as of 19 April 2023

Japan 225 Technical Education – Join in a long-term global uptrend with advantages

Source: TradingView as of 19 April 2023

From its 31-year high of 30,835 hit on 14 September 2021, the Japan 225 Index (a proxy for the Nikkei 225 futures) has formed a “Symmetrical Triangle” configuration for 18 months in a long global uptrend . from 10 March 2009 low of 6,945.

The upper (freedom) and lower (support) limits of the “Symmetrical Triangle” are at 28,665 and 25,630.

The monthly RSI oscillator has formed an upcoming bullish breakout from its downward resistance indicating a revival of the long-term upside that could translate into a bullish breakout of the setup. “Symmetrical Triangle” of the Index.

However, a break with a weekly close below the long-term pivotal support of 24,190 negates the bullish tone for a decline to the next support at 20,700.

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