Tokyo Market Outlook: Will Japan exit 'reflation policy'? Market eyes 69,000-yen resistance level

The Nikkei Stock Average fell 647 yen from the previous session to 68,309 yen on Oct. 2, declining for the first time in three sessions. The drop came as profit-taking expanded after the index surged more than 3,400 yen over the prior two sessions. Along with attention on tonight's U.S. September jobs report, a key focus will be whether the Nikkei can break through chart resistance at 69,220 yen - the recovery high reached on Aug. 17 - as it aims to reclaim the 70,000-yen level.

In AI and semiconductor-related stocks, Micron Technology 's earnings released Sept. 30 were well-received this week. However, moves toward AI regulations remain in focus, and Taiwan Semiconductor Manufacturing Company (TSMC) 's September sales figures, due Oct. 8 next week, are expected to draw close attention.

Meanwhile, whether Japan's reflation policy has ended is drawing strong interest from foreign investors. Economic and Fiscal Policy Minister Minoru Kiuchi told a press conference on Sept. 25 that "the phase of Abenomics-style reflation policy - combining monetary easing with flexible fiscal measures - is over." Nevertheless, concerns over rising interest rates driven by fiscal expansion remain strong, with some market participants noting that "the United States is likely calling for an early end to Japan's abnormal negative real interest rate policy." Against this backdrop, an extraordinary Diet session convenes on Oct. 5 next week, where Prime Minister Sanae Takaichi is scheduled to deliver her policy speech. Debate over the Takaichi administration's "responsible expansionary fiscal policy," including potential consumption tax cuts, is expected to intensify.

If the rise in U.S. and Japanese yields subsides, it could support equity prices and provide a tailwind for the Nikkei to break above its August resistance. Additionally, constituent stock changes for the TOPIX rebalancing are expected to be announced on Oct. 7. Next week also marks Nobel Prize Week, with announcements for Physiology or Medicine on Oct. 5, Physics on Oct. 6, Chemistry on Oct. 7, Literature on Oct. 8, Peace on Oct. 9, and Economic Sciences on Oct. 12.

Other key events include the U.S. September ISM Non-Manufacturing Index on Oct. 5, the U.S. August trade balance on Oct. 6, and minutes from the September Federal Open Market Committee meeting on Oct. 7. The preliminary U.S. October University of Michigan Consumer Sentiment Index will be released on Oct. 9. On the corporate front, Constellation Brands reports earnings on Oct. 7, followed by PepsiCo on Oct. 8.

Domestically, Japan releases the September Consumer Confidence Survey on Oct. 5, holds a 10-year JGB auction on Oct. 6, and reports the August Monthly Labour Survey on Oct. 7. The September Economy Watchers Survey and a 30-year JGB auction follow on Oct. 8, with the August Household Survey due on Oct. 9, which also marks the special quotation (SQ) settlement date for equity options. Bank of Japan Governor Kazuo Ueda is scheduled to speak at the National Securities Conference on Oct. 6.

On the domestic earnings front, Kasumigaseki Capital Co., Ltd. <3498> and ICHIBANYA CO., LTD. <7630> report on Oct. 5; PAL GROUP Holdings CO., LTD. <2726> on Oct. 6; ABC-MART, INC. <2670> and WARABEYA NICHIYO HOLDINGS CO., LTD. <2918> on Oct. 7; FAST RETAILING CO., LTD. <9983>, Seven & I Holdings Co., Ltd. <3382>, YOSHINOYA HOLDINGS CO., LTD. <9861>, and Kewpie Corporation <2809> on Oct. 8; and YASKAWA Electric Corporation <6506> and FURUNO ELECTRIC CO., LTD. <6814> on Oct. 9. The Nikkei Stock Average is projected to trade between 66,500 and 69,800 yen next week.

Source: MINKABU PRESS

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