Outlook for the Nikkei average this week [14 June 2026]

 [Fundamental viewpoint]

Last week, U.S. stock markets rose for the week after President Trump indicated that he might sign an agreement with Iran as early as this weekend.

Weekly percentage change: Dow Jones: +0.66%, NASDAQ: +0.70%, S&P 500: +0.65%

                                       

On the other hand, medium- to long-term risks include concerns over military conflict in the Middle East and the prolonged Ukraine conflict, financial instability and worries about a global economic slowdown stemming from the U.S. administration's tariff policies and rising interest rates, as well as fears of a real estate bubble bursting and China's economic slowdown. Consequently, there are also concerns about the arrival of stagflation. Furthermore, continued attention is required regarding geopolitical risks in Latin America and East Asia.

The difference in the yield spread between the Japanese and U.S. markets is 1.31 points undervalued for the Japanese market when the OECD's nominal GDP forecast for 2026 is taken into account. The reason for the undervaluation is the difference between the S&P 500's P/E ratio of 21.5 and the Nikkei 225's P/E ratio of 17.9 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 2026 relative to the current price of the Nikkei 225 will be 1.31 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 23.3 Or, the Nikkei 225 will be around 86,130 yen.

As a result, the Japanese market is undervalued by about 20,110 yen in the medium to long term.

From a fundamental perspective, one could argue that the Japanese market is about 20,110 yen less attractive than the U.S. market. Last week, the weakness in the Japanese market narrowed.

 

[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 2026 GDP estimate (now +2.5%) 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 a above the 200-day line and the clouds on the Ichimoku Chart. This week, the focus will be on whether the NYDow can keep above the 25-day line.

②    Following the release of earnings results, the projected ROE for Nikkei 225 constituent stocks stood at +10.6%. This represents an improvement of +1.7 percentage points compared to three months ago. The profit growth rate was +9.7%, marking an improvement of +9.5 percentage points compared to three months ago.

③    Although U.S. long-term interest rates fell and the interest rate differential between Japan and the U.S. narrowed from 1.89 to 1.85, the dollar-yen exchange rate remained range-bound between the 159 and 160 yen levels. The Dollar Index fell 0.26% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2026 is expected to be +3.2% for Japan and +4.7% for the U.S., so the Japanese market is 1.7 percentage points inferior in this aspect.

⑤    The first week of June saw net selling, and it is highly likely that the second week of June also saw net selling; net buying is expected this week. Last week, out of the five points, point ① was a bullish factor.

 

[Technical viewpoint]

From a technical perspective, the Japanese market is overvalued by 14.6 percentage points (equivalent to approximately ¥9,640 for the Nikkei 225) relative to the NASDAQ's 200-day moving average deviation rate on a medium-to-long-term basis. Meanwhile, it is overvalued by 18.3 percentage points (equivalent to approximately ¥12,080 for the Nikkei 225) relative to the NY Dow's 200-day moving average deviation rate on a medium-to-long-term basis.

 

The Japanese market is performing better than the Dow Jones and NASDAQ. The VIX, an indicator of volatility in the U.S. market, fell to 17.7 for the week. The Nikkei VI rose to 37.3 for the week. While the U.S. market is in a state of “fear,” the Japanese market is in a state of “extreme fear.”

 

The Nikkei Average is above the 9-day and 25-day moving averages. A “green light” is lit for the short-term trend.

The Nikkei Average is above the cloud in the Ichimoku Kinko Hyo chart. The overall deviation rate is +39.8%, and the deviation rate from the 200-day moving average is +24.8%. With three factors positive, a “green light” is lit for the medium-term trend.

 

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

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

 

[Outlook for this week]

In the U.S. market, concerns about an economic downturn driven by rising long-term interest rates—a result of the prolonged conflict in the Middle East—and high oil prices are likely to be the primary focus for the time being.

 

Looking at the technical aspects, the U.S. market is in a medium-term up 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 indicates that the yen has shifted towards depreciation, with the low of 139 yen reached in April 2025 marking the bottom. This week, the yen is expected to trade between the 159 and 161 yen per dollar range.

 

In the U.S. markets this week, the question of whether a memorandum of understanding is reached between the U.S. and Iran is likely to have a significant impact on trading. In terms of economic indicators, the manufacturing PMI, industrial production, and retail sales will be closely watched. Regarding monetary policy, the Federal Reserve, the Bank of Japan, and the Bank of England are set to announce their policy interest rates. Globally, data releases will include Japan’s Consumer Price Index (CPI) and machinery orders; Germany’s business sentiment index; the UK’s CPI and retail sales; and China’s industrial production, retail sales, unemployment rate, housing prices, and fixed-asset investment.

 

Last week, the Nikkei 225 outperformed the expected range. The upper limit was exceeded by about 620 yen, and the lower limit by about 520 yen.

This week, the Nikkei 225 is expected to trade within a range defined by the upper limit at the +2σ Bollinger Band (currently around 68,710 yen) and the lower limit at the 25-day moving average (currently 64,190 yen).

 

The Nikkei Average is expected to get off to a firm start this week, as investor sentiment continues to improve significantly on hopes that the fighting between the U.S. and Iran will come to an end. If the fighting does indeed end, the index could see further gains.