The Tokyo stock market on Monday the 30th saw the Nikkei Stock Average plunge 1,487 yen to 51,885, marking a continued sharp decline. This was the third consecutive day of losses counting from the latter half of the previous week, and today's drop was quite severe, as feared amid the effective fiscal year-end transition. While the dividend ex-rights impact on the Nikkei Average was estimated at around 350 yen, the violent selloff seemed to dismiss such calculations, with the index at one point falling nearly 2,800 yen. In the afternoon session, index buying led by futures helped rapidly narrow the losses, but actual demand-driven buying remained limited. Major AI and semiconductor-related stocks, which had been the market's mainstay, have seen institutional investors actively reducing positions for risk-aversion purposes, with individual investors serving as the counterparty. The situation in Iran remains unpredictable, and it is uncertain whether the bold buying by retail investors, relying on past successful experiences, will be rewarded this time.

Military attacks on Iran by the United States and Israel show no signs of abating but rather intensifying, with successive reports suggesting preparations for ground operations. U.S. President Trump appears to be seeking a path toward a peace agreement with an eye on midterm elections, but "Israeli Prime Minister Netanyahu is extremely hawkish and willing to act unilaterally. President Trump, perhaps having some weakness exploited, cannot stop him," according to an online securities analyst. The Trump administration has adopted an exclusively hardline policy toward Iran, causing Iran to further harden its stance, and it appears that even if some deal were proposed, Netanyahu would not accept it.

Under these circumstances, important economic indicators will be released both domestically and abroad this week. Whether concerns about inflation without demand will ease or amplify anxiety will be closely watched, as it is intimately connected to long-term interest rates and stock price movements. Domestically, the Tokyo ward area Consumer Price Index (CPI) for March will be released on the 31st, and the Bank of Japan Tankan survey will be disclosed on April 1st. Overseas, attention will focus on the U.S. Job Openings and Labor Turnover Survey (JOLTS) for February, released on the 31st, the U.S. ISM Manufacturing Index for March on the 1st, and the U.S. employment statistics for March on the 3rd. Acceleration of inflation that is not demand-pull type, stemming from escalating Middle East tensions, has become a spark for stagflation speculation. While "the spark is still small at this stage," according to a life insurance analyst, it is also true that this spark has recently been dancing frequently in the media. Consequently, there is a sense that this negative term is gradually expanding in investors' consciousness.

Even if a scenario of ceasefire or peace agreement with Iran were to materialize in the future, the matter may not be settled from a market perspective. Signs of stagflation raised by the Middle East crisis could enter a new risk stage in combination with the private credit problem that has begun to flare up in connection with AI investment. The chain of fund redemption restrictions triggered by the Blue Owl problem in the United States is unlikely to be resolved overnight, and the repercussions of the U.S. Anthropic shock continue endlessly. At minimum, it is undeniable that the consensus of "risk of not holding" AI-related stocks, which prevailed at one time, has significantly transformed.

Regarding stock supply and demand, there is a major difference in the current stock price turmoil compared to previous instances. Namely, short-selling attacks have not entered much. Until now, even when selling attacks involving futures occurred, stock prices ultimately held firm and rebounded, inducing semi-forced short covering and resulting in doubled rebounds. Because this became fodder for so-called short-squeeze rallies, short sellers have become unable to easily establish positions.

In other words, the current decline is not due to short-seller attacks but largely consists of actual demand selling by institutional investors. As mentioned earlier, those buying into the decline are individual investors making full use of margin trading limits. The margin trading profit/loss ratio at domestic online securities firms as of the end of last week was minus 6.9%, "a figure that, while not indicating overheating, supports very favorable investment sentiment," according to an online securities market analyst. Conversely, this means we are still far from a selling climax, and investors are actively buying on dips in real time. If and when those currently buying into the decline begin to sell, that would constitute a selling climax. In any case, small and mid-cap stocks with no overhead supply are currently positioned advantageously, but generally speaking, a wait-and-see stance is advisable.

Tomorrow's schedule includes the release of the Tokyo ward area Consumer Price Index (CPI) for March, unemployment rate for February, job-to-applicant ratio for February, preliminary industrial production for February, and commercial statistics for February before the market opens. During morning trading hours, a 2-year government bond auction is scheduled. During afternoon trading hours, automobile export results for February, construction machinery shipments for February, and housing starts statistics for February will be disclosed. Overseas, market interest is high in the China Manufacturing Purchasing Managers' Index (PMI) for March, China Non-Manufacturing PMI for March, Eurozone Consumer Price Index (HICP) preliminary for March, as well as several important U.S. indicators including the S&P CoreLogic Case-Shiller Home Price Index for January, Chicago PMI for March, Consumer Confidence Index for March, and Job Openings and Labor Turnover Survey (JOLTS) for February. Additionally, Fed Governor Barr will participate in a discussion, and Fed Vice Chair Bowman is scheduled to deliver a speech, with their content attracting attention.

Source: MINKABU PRESS