On the 30th, the Tokyo stock market saw the Nikkei Stock Average fall 632 yen to 59,284, down from the previous trading day, marking a consecutive decline. The market has shifted toward a risk-off sentiment in the near term. While investors have become accustomed to the news flow regarding the Iranian situation and are no longer frantically reacting, a heavy mood has begun to pervade the market. The Nikkei's decline of over 600 yen was roughly the same as on the 28th, the day before the holiday. Trading volume remained robust for consecutive days, with turnover approaching 10 trillion yen on the 30th. However, the internal composition was completely opposite. On the 28th, despite the Nikkei's drop of over 600 yen, advancing stocks accounted for more than 80% of the Prime Market, and the TOPIX rose nearly 1%. In contrast, on the 30th, declining stocks reached 76%, and the TOPIX fell 1%, completely erasing the gains from the 28th. WTI crude oil futures prices surged again to the 110-dollar-per-barrel range, and domestic long-term interest rates rose to the 2.5% level for the first time in 29 years, creating strong headwinds. Regarding the Middle East issue, the negative aspects of the Trump effect have come to the fore in the United States, Europe, and Japan.

Over 2,000 years ago, during China's Warring States period, Mencius, a renowned Confucian scholar, taught that "there are no just wars in the Spring and Autumn period." The current Middle East crisis is not a righteous battle, at least for the Trump administration, where business calculations of profit and loss take precedence over principles.

Regarding the military attacks on Iran by the United States and Israel, for Israel, this is undoubtedly driven by a defensive instinct to eliminate an existential threat of national annihilation by thoroughly crushing Iran. However, while the Trump administration has the stated justification of preventing Iran's nuclear development, the real objective is oil interests. When Iran announced it would open the Strait of Hormuz to Japanese tankers, it stipulated that passage fees be settled in renminbi, clearly suggesting that China is providing rear support to Iran. For the United States, this represents a serious situation that threatens the petrodollar system, and the best option has emerged: to leverage Israel's urgent concerns and subjugate Iran. Along this trajectory lies, needless to say, the prize of winning the U.S.-China Cold War by cutting off China's energy supply artery.

Mencius observed that there were no just wars during the Spring and Autumn period, but the same can be said of any era, including the present. The Trump administration, having lowered the "world police" banner in the name of America First, launched a surprise attack to crush Iran not to protect global peace and security. The world has already realized that drawing a line between Russia's invasion of Ukraine as evil and America's attack on Iran as good is untenable. If China follows suit and moves toward a Taiwan crisis, the U.S. position becomes delicate, as raising a banner of righteousness becomes difficult.

Economically, concerns persist that cost-push inflation driven by surging oil prices will deepen and push open the door to stagflation. The Federal Reserve and central banks worldwide face difficult policy decisions. Conventionally, prioritizing rate hikes is the orthodox approach, but this would further dampen consumer sentiment. What makes this troublesome is that, on the same timeline, employment opportunities are steadily being lost due to the advancement of AI. Not only white-collar jobs but also physical labor sectors face declining human demand as physical AI becomes increasingly implemented in society. The shocking fact that the recently released University of Michigan Consumer Sentiment Index recorded its lowest level since the survey began in 1952 serves as a powerful warning.

If financial instability overlaps with this, markets will likely collapse. Currently, the possibility of private equity (PE) problems cascading to affect bank management is considered low, but the full picture has yet to emerge. The subprime problem was initially considered not a serious threat by consensus. However, that was merely the tip of the iceberg, ultimately leading to the Lehman Shock and a total sell-off of risk assets. It must not be forgotten that the PE problem has become a fuse for concerns about excessive AI investment. Until now, this has been dismissed as the howling of short sellers and has served as a stepping stone for short-squeeze rallies, but somewhere, the unraveling of round-trip transactions rumored at companies like NVIDIA will flip the switch on a collapse accelerator. Investors are required to operate at a very high level, enjoying the bull market before them while keeping in mind the scenario when the real wolf arrives.

In tomorrow's schedule, attention will focus on the Tokyo Consumer Price Index (CPI) for April, to be released before the market opens, along with weekly cross-border securities transactions. During morning trading, auctions for 3-month Treasury bills and 10-year inflation-indexed government bonds are scheduled. During afternoon trading, new vehicle sales for April (JADA) and light vehicle sales for April (JLVA) will be announced. Individual companies reporting earnings include M3, Inc. <2413>, SBI Holdings, Inc. <8473>, as well as five major trading companies: ITOCHU Corporation <8001>, Marubeni Corporation <8002>, MITSUI & CO., LTD. <8031>, SUMITOMO CORPORATION <8053>, and Mitsubishi Corporation <8058>. Overseas, market attention is high on the U.S. Institute for Supply Management (ISM) Manufacturing Index for April. Markets in China, Hong Kong, South Korea, Taiwan, the Philippines, Singapore, and other Asian countries will be closed.

Source: MINKABU PRESS

*Translated by generative AI. Click here for the original article.