Outlook for the Nikkei average this week [29 June 2025]

 [Fundamental viewpoint]

In the US markets last week, stock indices rose sharply over the week on the back of a ceasefire between Israel and Iran and the receding risk of tariffs in the immediate future.

Weekly change NY Dow: +3.82%, NASDAQ: +4.25%, S&P 500: +3.44%.

                                                                                                 

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, tariff policies of the U.S. administration, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. Furthermore, geopolitical risks in East Asia and the Middle East continue to require attention..

The difference in the yield spread between the Japanese and U.S. markets is 3.73 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 23.2and the Nikkei 225's P/E ratio of 15.9 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 3.73 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 39.0 Or, the Nikkei 225 will be around 98,510 yen.

As a result, the Japanese market is undervalued by about 58,360 yen in the medium to long term.

 

Fundamentally, the Japanese market can be said to be about JPY 58,360 less attractive than the US market. Weakness in the Japanese market has reduced in the last week.

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

①    Rising US market

②　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2025 GDP estimate (now +3.3%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily is below the 200-day line and the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was positive. The daily is above the 200-day line and the clouds of the Ichimoku Chart. This week, the focus will be on whether the NY Dow can keep above the 200-day line..

②    As a result of the earnings announcements, the expected ROE of the Nikkei 225 stocks was +9.1%, a deterioration of -0.1 percentage points compared to three months ago. Profit growth was -3.7%, a deterioration of -10.3 percentage points compared to three months ago.

③    US long-term interest rates fell and the interest rate differential between the US and Japan narrowed from 2.99 to 2.85, moving the yen against the dollar in the range of ¥146 to ¥143. The Dollar Index fell -1.54% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.3% for Japan and +4.4% for the U.S., so the Japanese market is 1.1 percentage points inferior in this aspect.

⑤    The third week of June was overbought, the fourth week of June was likely overbought and this week is expected to be overbought. Of the five points, ① and ⑤ were bullish last week.

 

[Technical viewpoint]

From a technical perspective, the Japanese market is undervalued by 1.4 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 560 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is overvalued by 3.0 point in the medium to long term (about 1200 yen when converted to the Nikkei 225).

 

The Japanese market is stronger than the NY Dow but weaker than the NASDAQ. The VIX, a measure of US market volatility, fell to a weekly low of 16.3. The Nikkei VI fell to 23.3 for the week. The US market is optimistic and the Japanese market is ‘skeptical..

 

The Nikkei 225 is above the 9-day line but the 25-day line. The short-term trend is now showing a “green signal.

The Nikkei 225 is above the Ichimoku Kinko's Kumo (equilibrium) cloud. The overall divergence was +19.8%, while the 200-day moving average divergence was +5.8%. As all three factors are positive, the medium-term trend also has a "green light".

 

In the US market, the NY Dow is above the 9-day line and 25-day and 200-day lines. It is above the clouds of the Ichimoku chart.

The NASDAQ is above the 9-day line and 25-day and 200-day lines. It is above the clouds above the Ichimoku Chart.

It is a ‘green light’ in the short term and a ‘green light’ in the medium term.

 

[Outlook for this week]

Looking at the US market from a fundamental perspective, recessionary fears are amplified in the near-term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, recession due to energy shortages and deteriorating political conditions in the EU bloc, US-China trade friction, financial market turmoil caused by the bursting of China's property bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

Looking at the technical aspects, the U.S. market is in a medium-term up trend and a short-term up trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.

 

Analysis of the foreign exchange market shows that the yen has turned stronger since topping out at 156 yen, which was reached in January 2025. This week, the yen is expected to be between 144 and 141 yen.

 

This week, US markets will focus on developments in trade negotiations between the US and its major trading partners. Attention will also focus on the ECB Central Bank Forum, where top policymakers, including Fed Chairman Jerome Powell, are expected to give their views on the economic and financial outlook. In terms of economic statistics, the employment report, ISM manufacturing and services PMIs and trade figures will be released. Globally, the focus will be on China's PMIs, Eurozone inflation, German manufacturing orders and the Bank of Japan's Tankan.

 

Last week, the Nikkei 225 was above the expected range. The upper price was above ¥720 and the lower price was above ¥110.

This week, the Nikkei 225 is expected to move above Bollinger Band +3σ (currently around JPY 40200) and below Bollinger Band +1σ (currently around JPY 38910).

             

This week, the Nikkei 225 is likely to remain above Bollinger Band +2σ for some time.

Outlook for the Nikkei average this week [22 June 2025]

 [Fundamental viewpoint]

Stock indices were choppy and mixed during the week in the US markets last week, as uncertainty over the military conflict between Israel and Iran weighed on the outlook, while diplomatic efforts were also underway.

Weekly volatility NY Dow: +0.02%, NASDAQ: +0.21%, S&P 500: -0.15%.

                                                                                                 

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, tariff policies of the U.S. administration, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. Furthermore, geopolitical risks in East Asia and the Middle East continue to require attention..

The difference in the yield spread between the Japanese and U.S. markets is 3.93 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 22.8 and the Nikkei 225's P/E ratio of 15.6 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 3.93 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 39.9 Or, the Nikkei 225 will be around 98,590 yen.

As a result, the Japanese market is undervalued by about 60,190 yen in the medium to long term.

 

Fundamentally, the Japanese market can be said to be about JPY 60,190 less attractive than the US market. Weakness in the Japanese market has reduced somewhat in the last week.

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

①    Rising US market

②　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2025 GDP estimate (now +3.3%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily is below the 200-day line and the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was negative. The daily is above the 200-day line and the clouds of the Ichimoku Chart. This week, the focus will be on whether the NY Dow can return above the 200-day line..

②    As a result of the earnings announcements, the expected ROE of the Nikkei 225 stocks was +9.1%, the same level as three months ago. Profit growth was -3.6%, a deterioration of -10.9 percentage points compared to three months ago.

③    Although long-term interest rates in the US fell and the interest rate differential between the two countries narrowed from 3.00 to 2.99, the dollar moved in a weaker direction against the yen in the range of 143-146 yen. The Dollar Index rose +0.65% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.3% for Japan and +4.4% for the U.S., so the Japanese market is 1.1 percentage points inferior in this aspect.

⑤    The second week of June was overbought, the third week of June was likely overbought and this week is expected to be overbought. Of the five points, (iii) was bullish last week.

 

[Technical viewpoint]

From a technical perspective, the Japanese market is undervalued by 2.8 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 1,080 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is overvalued by 2.2 point in the medium to long term (about 840 yen when converted to the Nikkei 225).

 

Japanese markets are weak against the NY Dow and NASDAQ. The VIX, an indicator of US market volatility, declined slightly to 20.6 for the week. The Nikkei VI fell to a weekly low of 25.6. Both the US and Japanese markets are in a state of ‘doubt’.

 

The Nikkei 225 is above the 9-day line but the 25-day line. The short-term trend is now showing a “green signal.

The Nikkei 225 is above the Ichimoku Kinko's Kumo (equilibrium) cloud. The overall divergence was +7.3%, while the 200-day moving average divergence was +1.3%. As all three factors are positive, the medium-term trend also has a "green light".

 

In the US market, the NY Dow is below the 9-day line and 25-day and 200-day lines. It is above the clouds of the Ichimoku chart.

The NASDAQ is bekow the 9-day line and above 25-day and 200-day lines. It is above the clouds above the Ichimoku Chart.

It is a ‘yellow light’ in the short term and a ‘yellow light’ in the medium term.

 

[Outlook for this week]

Looking at the US market from a fundamental perspective, recessionary fears are amplified in the near-term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, recession due to energy shortages and deteriorating political conditions in the EU bloc, US-China trade friction, financial market turmoil caused by the bursting of China's property bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term up trend, and the short-term is up trend.

 

Analysis of the foreign exchange market shows that the yen has turned stronger since topping out at 156 yen, which was reached in January 2025. This week, the yen is expected to be between 145 and 148 yen.

 

This week, US markets will continue to focus on developments in the Israeli-Iranian conflict, particularly the possibility of US military involvement, and updates on global trade negotiations. Attention will also focus on Fed Chairman Jerome Powell's congressional testimony. Economic indicators include the PCE report and durable goods orders. Globally, preliminary PMI figures for the US, Eurozone, Japan and other countries will also be released.

 

Last week, the Nikkei 225 was above the expected range. The upper price was above by JPY 160 and the lower price was above by JPY 650.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around JPY 38840) on the upside and the 25-day line (currently around JPY 37890) on the downside.

             

This week, it will be interesting to see whether the Nikkei 225 can hold above the support line at 38400 yen.

Outlook for the Nikkei average this week [15 June 2025]

 [Fundamental viewpoint]

In the US markets last week, stock indices fell on the week as tensions in the Middle East over Israel and Iran escalated.

Weekly volatility NY Dow: -1.32%, NASDAQ: -0.63%, S&P 500: -0.39%.

                                                                                                 

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, tariff policies of the U.S. administration, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. Furthermore, geopolitical risks in East Asia and the Middle East continue to require attention..

The difference in the yield spread between the Japanese and U.S. markets is 4.03 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 22.9 and the Nikkei 225's P/E ratio of 15.4 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 4.03 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 40.6 Or, the Nikkei 225 will be around 99,750 yen.

As a result, the Japanese market is undervalued by about 61,910 yen in the medium to long term.

 

Fundamentally, the Japanese market can be said to be about 61,910 less attractive than the US market. Weakness in the Japanese market was magnified..

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

①    Rising US market

②　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2025 GDP estimate (now +3.3%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily is below the 200-day line and the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was negative. The daily is above the 200-day line and the clouds of the Ichimoku Chart. This week, the focus will be on whether the NY Dow can return above the 200-day line..

②    As a result of the earnings announcements, the expected ROE of the Nikkei 225 stocks was +9.1%, a deterioration of -0.1 percentage points compared to three months ago. Profit growth came in at -3.9%, a deterioration of -11.0 percentage points compared to three months ago.

③    Although long-term interest rates in the US rose and the interest rate differential between the two countries widened from 2.95 to 3.00, the dollar moved in the direction of a stronger yen in the range of ¥145 to ¥142. The Dollar Index fell -1.07% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.3% for Japan and +4.4% for the U.S., so the Japanese market is 1.1 percentage points inferior in this aspect.

⑤    The first week of June was overbought, the second week of June was likely overbought and this week is expected to be overbought. Of the five points, ① and ③ were bearish last week.

 

[Technical viewpoint]

From a technical perspective, the Japanese market is undervalued by 4.5 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 1,700 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is overvalued by 0.6 point in the medium to long term (about 230 yen when converted to the Nikkei 225).

 

Japanese markets are weak against the NY Dow and NASDAQ. The VIX, a measure of US market volatility, rose to 20.8 for the week. The Nikkei VI rose to 27.4 for the week. Both the US and Japanese markets are in a state of ‘doubt’.

 

The Nikkei 225 is below the 9-day line but above the 25-day line. The short-term trend is now showing a “yellow signal.

The Nikkei 225 is above the Ichimoku Kinko's Kumo (equilibrium) cloud. The overall divergence was +3.3%, while the 200-day moving average divergence was -0.2%. Since the two factors are positive, the medium-term trend is also “yellowing”.

 

In the US market, the NY Dow is below the 9-day line and 25-day and 200-day lines. It is above the clouds of the Ichimoku chart.

The NASDAQ is bekow the 9-day line and above 25-day and 200-day lines. It is above the clouds above the Ichimoku Chart.

It is a ‘yellow light’ in the short term and a ‘yellow light’ in the medium term.

 

[Outlook for this week]

Looking at the US market from a fundamental perspective, recessionary fears are amplified in the near-term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, recession due to energy shortages and deteriorating political conditions in the EU bloc, US-China trade friction, financial market turmoil caused by the bursting of China's property bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term no trend, and the short-term is no trend.

 

Analysis of the foreign exchange market shows that the yen has turned stronger since topping out at 156 yen, which was reached in January 2025. This week, the yen is expected to be between 145 and 142 yen.

 

Geopolitical tensions in the Middle East will continue to be a focus of attention in the US markets this week. The outcome of the FOMC meeting and progress in trade negotiations with key partner countries will also need to be closely monitored. In terms of economic indicators, retail sales and industrial production will be released. Globally, the G7 summit, monetary policy announcements from China, Japan and the UK, UK inflation, German business confidence index, Chinese industrial production and retail sales, and Japanese trade statistics will be released.

 

Last week, the Nikkei 225 fell below its expected range. The upside was above ¥60 and the downside was below ¥220.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around JPY 38490) on the upside and the Bollinger Band -1σ (currently around JPY 37400) on the downside.

             

This week, it will be interesting to see whether the Nikkei 225 will close above the 11 June high (JPY 38529) or below the 22 May low (JPY 36856).

Outlook for the Nikkei average this week [8 June 2025]

 [Fundamental viewpoint]

Stock indexes rose for the week as the May jobs report showed a resilient labor market and undue concern over worsening employment receded.

Weekly change NY Dow: +1.17%, NASDAQ: +2.18%, S&P 500: +1.50%.

                                                                                                 

On the other hand, medium- to long-term risks include concerns about a prolonged conflict in Ukraine, tariff policies of the U.S. administration, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. Furthermore, geopolitical risks in East Asia and the Middle East continue to require attention..

The difference in the yield spread between the Japanese and U.S. markets is 3.86 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 22.5 and the Nikkei 225's P/E ratio of 15.5 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 3.86 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 38.6 Or, the Nikkei 225 will be around 93,880 yen.

As a result, the Japanese market is undervalued by about 56,140 yen in the medium to long term.

 

Fundamentally, the Japanese market can be said to be about 56,140 less attractive than the US market. Weakness in the Japanese market was somewhat magnified..

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

①    Rising US market

②　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2025 GDP estimate (now +3.3%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily is below the 200-day line and the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was positive. The daily is above the 200-day line and the clouds of the Ichimoku Chart. This week, the focus will be on whether the NY Dow can keep above the 200-day line..

②    As a result of the earnings announcements, the expected ROE of the Nikkei 225 stocks was +9.1%, a deterioration of -0.1 percentage points compared to three months ago. Profit growth came in at -4.0%, a deterioration of -10.5 percentage points compared to three months ago.

③    Although U.S. long-term interest rates declined, the interest rate differential between the U.S. and Japan widened from 2.92 to 2.95 and the dollar moved toward a weaker yen in the range of ¥142 to ¥145. The dollar index fell -0.24% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.3% for Japan and +4.4% for the U.S., so the Japanese market is 1.1 percentage points inferior in this aspect.

⑤    The fifth week of May was overbought, the first week of June was likely overbought, and overbought is expected this week. Of the five points, ① and ③ were bullish last week.

 

[Technical viewpoint]

From a technical perspective, the Japanese market is undervalued by 5.6 points in the medium to long term in terms of the difference in the 200-day divergence rate from the NASDAQ (about 2,110 yen when converted to the Nikkei 225). On the other hand, the difference in the 200-day divergence from the NYDow is undervalued by 1.0 point in the medium to long term (about 380 yen when converted to the Nikkei 225).

 

Japanese markets remain weak against the NY Dow and NASDAQ. The VIX, a measure of U.S. market volatility, declined to a weekly low of 16.8. The Nikkei VI fell to a weekly low of 23.4. The U.S. market is somewhat optimistic, while the Japanese market is “skeptical..

 

The Nikkei 225 is below the 9-day line but above the 25-day line. The short-term trend is now showing a “yellow signal.

The Nikkei 225 is above the Ichimoku Kinko's Kumo (equilibrium) cloud. Since the two factors are positive, the medium-term trend is also “yellowing”.

 

In the US market, the NY Dow is above the 9-day line and 25-day and 200-day lines. It is above the clouds of the Ichimoku chart.

The NASDAQ is above the 9-day line and 25-day and 200-day lines. It is above the clouds above the Ichimoku Chart.

It is a ‘green light’ in the short term and a ‘green light’ in the medium term.

 

[Outlook for this week]

Looking at the US market from a fundamental perspective, recessionary fears are amplified in the near-term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, recession due to energy shortages and deteriorating political conditions in the EU bloc, US-China trade friction, financial market turmoil caused by the bursting of China's property bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term no trend, and the short-term is no trend.

 

Analysis of the foreign exchange market shows that the yen has turned stronger since topping out at 156 yen, which was reached in January 2025. This week, the yen is expected to be between 143 and 146 yen.

 

Investors will be watching the U.S. markets this week to see how the widening rift between President Trump and Elon Musk will play out, in addition to the continued uncertainty surrounding the U.S. tariff negotiations. Economic indicators to watch include CPI and PPI, as well as the University of Michigan's Consumer Confidence Index. Globally, the focus will be on China's consumer and producer prices and trade statistics, German producer prices, and U.K. employment and industrial production.

 

Last week, the Nikkei 225 remained within the expected range. The upper price was below ¥660 and the lower price was above ¥80.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around 38420 yen) on the upside and the 25-day line (currently around 37510 yen) on the downside.

             

It will be interesting to see if the Nikkei 225 will continue to rise above its May 13 high (38494 yen) or fall below its May 22 low (36856 yen) this week.

Outlook for the Nikkei average this week [1 June 2025]

 [Fundamental viewpoint]

In the US markets last week, stock indices gained on the week as the postponement of the timing of the imposition of additional tariffs on the European Union reduced excessive concerns over trade frictions.

Weekly change NY Dow: +1.60%, NASDAQ: +2.01%, S&P 500: +1.88%.

                                                                                                 

On the other hand, medium- to long-term risks include concerns about the prolonged conflict in Ukraine, energy costs, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is 3.74 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 22.4 and the Nikkei 225's P/E ratio of 15.6 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 3.74 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 37.7 Or, the Nikkei 225 will be around 91,610 yen.

As a result, the Japanese market is undervalued by about 53,640 yen in the medium to long term.

 

Fundamentally, the Japanese market can be said to be about 53,640 less attractive than the US market. Weakness in the Japanese market improved somewhat last week..

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

①    Rising US market

②　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2025 GDP estimate (now +3.3%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily is below the 200-day line and the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was positive. The daily is above the 200-day line and the clouds of the Ichimoku Chart. This week, the focus will be on whether the NY Dow can return above the 200-day line..

②    As a result of the earnings announcements, the expected ROE of the Nikkei 225 stocks was +9.1%, a deterioration of -0.1 percentage points compared to three months ago. Profit growth came in at -4.1%, a deterioration of -10.6 percentage points compared to three months ago.

③    Although long-term interest rates in the US declined and the interest rate differential between the two countries narrowed from 2.99 to 2.92, the dollar moved in a weaker direction against the yen in the range of ¥142 to ¥146. The Dollar Index rose +0.34% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.3% for Japan and +4.4% for the U.S., so the Japanese market is 1.1 percentage points inferior in this aspect.

⑤    The fourth week of May was overbought, the fifth week of May was likely overbought and this week is expected to be overbought. Of the five points, ① and ③ were bullish last week.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 3.1 point in the medium to long term in terms of the difference in 200-day divergence from the NASDAQ (about 1150 yen in terms of the Nikkei 225). On the other hand, the difference in 200-day divergence from the NYDow is overvalued by 0.3 points in the medium to long term (about 50 yen in terms of the Nikkei 225).

 

The Japanese market is strong against the NY Dow and weak against the NASDAQ. The VIX, a measure of US market volatility, fell to a weekly low of 18.6. The Nikkei VI fell to 23.6 for the week. The US market is slightly optimistic and the Japanese market is ‘skeptical’.

 

The Nikkei 225 is above the 9-day and  25-day lines. The short-term trend has a "green light".

The Nikkei 225 is above the Ichimoku Chart cloud. The overall divergence is +6.0% and the 200-day moving average divergence is +0.5%. 3 factors are positive, so the medium-term trend is also showing a ‘green light’.

 

In the US market, the NY Dow is above the 9-day line and 25-day and below 200-day lines. It is above the clouds of the equilibrium chart.

The NASDAQ is above the 9-day line and 25-day and 200-day lines. It is above the clouds above the Ichimoku Chart.

It is a ‘green light’ in the short term and a ‘yellow light’ in the medium term.

 

[Outlook for this week]

Looking at the US market from a fundamental perspective, recessionary fears are amplified in the near-term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, recession due to energy shortages and deteriorating political conditions in the EU bloc, US-China trade friction, financial market turmoil caused by the bursting of China's property bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term no trend, and the short-term is no trend.

 

Analysis of the foreign exchange market shows that the yen has turned stronger since topping out at 156 yen, which was reached in January 2025. This week, the yen is expected to be between 143 and 146 yen.

 

US markets are expected to be volatile this week after President Trump accused China of violating a preliminary trade agreement with the US. Economic indicators of note include the ISM manufacturing and services PMIs, speeches by Fed officials, JOLTS jobs, manufacturing orders, trade balance and employment figures. Globally, the ECB's interest rate policy, Eurozone inflation indicators and Chinese PMIs will be released.

 

Last week, the Nikkei 225 remained within the expected range. The upper price was below ¥640 and the lower price was above ¥640.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around JPY 38970) on the upside and the 25-day line (currently around JPY 37090) on the downside.

             

This week, the Nikkei 225 will be interested in whether it exceeds the 13 May high (JPY 38494) or falls below the 22 May low (JPY 36856).

Outlook for the Nikkei average this week [25 May 2025]

 [Fundamental viewpoint]

In the US markets last week, stock indices fell on the week due to a sharp rise in long-term bond yields and uncertainty over tariffs.

Weekly change NY Dow: -2.47%, NASDAQ: -2.47%, S&P 500: -2.61%.

                                                                                                 

On the other hand, medium- to long-term risks include concerns about the prolonged conflict in Ukraine, energy costs, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is 3.89 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 22.1 and the Nikkei 225's P/E ratio of 15.3 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 3.89 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 38.0 Or, the Nikkei 225 will be around 92,070 yen.

As a result, the Japanese market is undervalued by about 54,910 yen in the medium to long term.

 

Fundamentally, the Japanese market can be said to be about 54,910 yen less attractive than the US market. Weakness in the Japanese market widened somewhat last week.

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

①    Rising US market

②　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2025 GDP estimate (now +3.3%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was negative last week. The daily is above the 200-day line and the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was negative. The daily is above the 200-day line and the clouds of the Ichimoku Chart. This week, the focus will be on whether the NY Dow can hold above the 200-day line..

②    As a result of the earnings announcements, the expected ROE of the Nikkei 225 stocks was +9.1%, a deterioration of -0.1 percentage points compared to three months ago. Profit growth came in at -4.2%, a deterioration of -11.2 percentage points compared to three months ago.

③    Although long-term interest rates in the US rose, the interest rate differential between the two countries narrowed from 3.04 to 2.99, and the dollar moved towards a stronger yen in the range of ¥145 to ¥142. The Dollar Index fell -1.85% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.3% for Japan and +4.4% for the U.S., so the Japanese market is 1.1 percentage points inferior in this aspect.

⑤    The third week of May was overbought, the fourth week of May was likely overbought and this week is expected to be overbought. Of the five points, ① and ③ were bearish last week..

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 3.1 point in the medium to long term in terms of the difference in 200-day divergence from the NASDAQ (about 1150 yen in terms of the Nikkei 225). On the other hand, the difference in 200-day divergence from the NYDow is overvalued by 0.3 points in the medium to long term (about 50 yen in terms of the Nikkei 225).

 

Japanese markets turned stronger against the NY Dow and weaker against the NASDAQ. The VIX, an indicator of US market volatility, rose to 22.3 for the week. The Nikkei VI rose to 24.2 for the week. The US and Japanese markets are in a state of ‘doubt’..

 

The Nikkei 225 is below the 9-day and above 25-day lines. The short-term trend has a "yellow light".

The Nikkei 225 is above the Ichimoku Chart cloud. The overall divergence was +1.2%, while the 200-day moving average divergence was -1.7%.One factor being negative, which is a ‘yellow light’ for the medium-term trend.

 

In the US market, the NY Dow is below the 9-day line and above 25-day and below 200-day lines. It is above the clouds of the equilibrium chart.

The NASDAQ is below the 9-day line and above 25-day and 200-day lines. It is above the clouds above the Ichimoku Chart.

This is a ‘yellow light’ in the short term and a yellow light’ in the medium term.

 

[Outlook for this week]

Looking at the US market from a fundamental perspective, recessionary fears are amplified in the near-term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, recession due to energy shortages and deteriorating political conditions in the EU bloc, US-China trade friction, financial market turmoil caused by the bursting of China's property bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

Looking at the technical aspects, the U.S. market is in a medium-term no trend and a short-term no trend. The Japanese market is in a medium-term no trend, and the short-term is no trend.

 

Analysis of the foreign exchange market shows that the yen has turned stronger since topping out at 156 yen, which was reached in January 2025. This week, the yen is expected to be between 143 and 140 yen.

 

This week's US markets are likely to be disturbed by President Trump's new tariff offensive targeting the EU and Apple. Also of interest are comments from Fed officials, FOMC minutes, PCE price index, durable goods orders, trade balance, revised Q1 GDP growth, NVIDIA results and the S&P/Case-Shiller house price index. Globally, inflation statistics for France and Germany, India's Q1 GDP, Germany's GfK consumer confidence index, Japan's industrial production and retail sales, and the consumer confidence index will be released.

 

Last week, the Nikkei 225 fell below its expected range. The upside was below ¥1100 and the downside was above ¥800.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around JPY 39060) on the upside and the 25-day line (currently around JPY 36380) on the downside.

             

This week, the Nikkei 225 is likely to be interested in whether or not it can maintain above the 25-day line.

Outlook for the Nikkei average this week [18 May 2025]

 [Fundamental viewpoint]

In the US markets last week, stock indices gained on the week on moves towards easing US-China trade frictions and lower long-term interest rates.

Weekly change NY Dow: +3.41%, NASDAQ: +7.15%, S&P 500: +5.27.

                                                                                                 

On the other hand, medium- to long-term risks include concerns about the prolonged conflict in Ukraine, energy costs, financial instability and global economic slowdown due to rising interest rates, and the collapse of the real estate bubble and economic slowdown in China. This also raises concerns about the arrival of stagflation. In addition, geopolitical risks in East Asia and the Middle East continue to require attention.

The difference in the yield spread between the Japanese and U.S. markets is 3.56 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2025 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 22.1 and the Nikkei 225's P/E ratio of 16.3 the difference between the U.S. and Japanese interest rates, and the difference in GDP growth rates.

In order for the U.S. and Japanese markets to be in equilibrium, the following conditions must be met.

The difference in GDP growth between Japan and the U.S. in 2025 relative to the current price of the Nikkei 225 will be 3.56 percentage points larger than the OECD forecast. (Japan is revised downward or the U.S. is revised upward). Or the current year's forecast PER for stocks in the Nikkei Stock Average becomes about 38.8 Or, the Nikkei 225 will be around 89,810 yen.

As a result, the Japanese market is undervalued by about 52,050 yen in the medium to long term.

 

Fundamentally, the Japanese market can be said to be about 52,050 yen less attractive than the US market. Weakness in the Japanese market widened somewhat last week.

 

[Conditions for Nikkei average rise]

In the future, the following assumptions are necessary for the Nikkei average to rise further.

①    Rising US market

②　Increase in profit forecast for the current fiscal year above the previous year's level

③ Further depreciation of the yen due to the widening interest rate gap between Japan and the U.S.

④ Upward revision of Japan's 2025 GDP estimate (now +3.3%) by OECD

⑤ Foreign investors over-buying

 

Looking at recent movements

①    The weekly leg of the NYDow was positive last week. The daily is above the 200-day line and the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was positive. The daily is above the 200-day line and the clouds of the Ichimoku Chart. This week, the focus will be on whether the NY Dow can hold above the 200-day line..

②    As a result of the earnings announcements, the expected ROE of the Nikkei 225 stocks was +8.1%, a deterioration of -0.7 percentage points compared to three months ago. Profit growth came in at -13.1%, a deterioration of -20.4 percentage points compared to three months ago.

③    Long-term interest rates in the US rose and the interest rate differential between the two countries widened from 3.03 to 3.04, with the dollar moving slightly weaker against the yen in the range of ¥148 to ¥144. The Dollar Index rose +0.55% on the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2025 is expected to be +3.3% for Japan and +4.4% for the U.S., so the Japanese market is 1.1 percentage points inferior in this aspect.

⑤    The first week of May was overbought, the second week of May was likely overbought and this week is expected to be overbought. Of the five points, ① was bullish last week.

 

[Technical viewpoint]

Looking at the Japanese market from a technical perspective, it is undervalued by 4.5 point in the medium to long term in terms of the difference in 200-day divergence from the NASDAQ (about 1700 yen in terms of the Nikkei 225). On the other hand, the difference in 200-day divergence from the NYDow is undervalued by 1.0 points in the medium to long term (about 380 yen in terms of the Nikkei 225).

 

Japanese markets turned strong against the NY Dow and NASDAQ. The VIX, a measure of US market volatility, fell to a weekly low of 17.2. The Nikkei VI fell to 23.0 for the week. The US market is slightly optimistic and the Japanese market is ‘skeptical’..

 

The Nikkei 225 is above the 9-day and 25-day lines. The short-term trend has a "green light".

The overall divergence was +7.7%, while the 200-day moving average divergence was -0.3%.One factor being negative, which is a ‘yellow light’ for the medium-term trend.

 

In the US market, the NY Dow is above the 9-day line and 25-day and below 200-day lines. It is within the clouds of the equilibrium chart.

The NASDAQ is above the 9-day line and 25-day and 200-day lines. It is above the clouds on the Ichimoku Chart.

This is a ‘green light’ in the short term and a green light’ in the medium term.

 

[Outlook for this week]

Looking at the US market from a fundamental perspective, recessionary fears are amplified in the near-term. Other risk factors include inflation and rising interest rates due to the Russia-Ukraine war, recession due to energy shortages and deteriorating political conditions in the EU bloc, US-China trade friction, financial market turmoil caused by the bursting of China's property bubble and credit crunch, and expanding geopolitical risks in the Middle East.

 

Looking at the technical aspects, the U.S. market is in a medium-term up trend and a short-term up trend. The Japanese market is in a medium-term no trend, and the short-term is up trend.

 

Analysis of the foreign exchange market shows that the yen has turned stronger since topping out at 156 yen, which was reached in January 2025. This week, the yen is expected to be between 144 and 147 yen.

 

This week, US markets will focus on developments surrounding tariffs, speeches by Fed officials, S&P Global Manufacturing and Services PMIs and the release of existing and new home sales figures. Globally, PMIs for Japan, India, France, Germany, the eurozone and the UK will be in focus. Other releases will include China's industrial production and retail sales, house price index, fixed asset investment, interest rate decisions, Japan's inflation rate, Germany's Ifo business climate index and UK retail sales and inflation.

 

Last week, the Nikkei 225 remained within the expected range. The upper price matched and the lower price exceeded by JPY 160.

This week, the Nikkei 225 is expected to move between the Bollinger Band +2σ (currently around JPY 38990) on the upside and Bollinger Band +1σ (currently around JPY 37320) on the downside.

             

It will be interesting to see whether the Nikkei 225 can maintain its uptrend this week.