Outlook for the Nikkei average this week [13 September 2026]

 [Fundamental viewpoint]

Last week, as tensions in the Middle East escalated further, crude oil futures and long-term interest rates rose, causing stock indices to decline for the week.

Weekly percentage change: NY Dow: -1.57%, NASDAQ: -0.66%, S&P 500: -0.80%

 

On the other hand, medium- to long-term risks include concerns over military conflicts in the Middle East and the protracted conflict in Ukraine; financial instability caused by inflation and rising interest rates driven by high crude oil prices, along with concerns about a global economic slowdown; and concerns over a real estate bubble burst and an economic slowdown in China. Furthermore, these factors have raised concerns about the onset of stagflation. In addition, continued vigilance is required regarding geopolitical risks in Latin America and East Asia..

Considering the OECD’s nominal GDP forecasts for 2026, the Japanese market is undervalued by 0.12 points relative to the U.S. market. The factors contributing to this overvaluation include the difference between the S&P 500’s P/E ratio of 20.3 and the projected P/E ratio of 16.8 for the Nikkei 225 constituent stocks for the current fiscal year, as well as the interest rate differential and the difference in GDP growth rates between Japan and the U.S.

For the Japanese and U.S. markets to reach equilibrium, the following conditions must be met:

Compared to the current Nikkei 225 price, the difference in GDP growth rates between Japan and the U.S. in 2026 must narrow by an additional 0.12 percentage points compared to the OECD forecast (either Japan’s forecast must be revised upward or the U.S.’s must be revised downward). Alternatively, the projected P/E ratio for the current fiscal year for Nikkei 225 constituent stocks must reach approximately 17.13. Or, the Nikkei 225 must reach approximately 65,340 yen.

Consequently, the Japanese market is undervalued by about 1,330 yen in the medium to long term.

From a fundamental perspective, one could say that the Japanese market is slightly less attractive than the U.S. market. Last week, the Japanese market became undervalued.

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 [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 +2.9%) 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 within the clouds on the Ichimoku Chart. The weekly leg of the NASDAQ was negative. 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 return above the 25-day line.

②    Following the release of earnings results, the projected ROE for Nikkei 225 constituent stocks stood at +11.0%. This represents an improvement of +0.3 percentage points compared to three months ago. The profit growth rate was +17.9%, marking an improvement of +8.4 percentage points compared to three months ago.

③    Although U.S. long-term interest rates rose and the interest rate differential between Japan and the U.S. widened from 1.88 to 2.00, the dollar-yen exchange rate moved in the direction of yen appreciation, falling from the 156-yen range to the 152-yen range. The Dollar Index fell by 0.07% for the week.

④    The OECD's nominal GDP growth rate for Japan and the U.S. in 2026 is expected to be +2.9% for Japan and +5.8% for the U.S., so the Japanese market is 2.9 percentage points inferior in this aspect.

⑤    Net buying was recorded in the first week of September. It is highly likely that net selling occurred in the second week of September, and net selling is expected this week. Last week, out of the five points, points ① and ③ were bearish factors.

 

[Technical viewpoint]

From a technical perspective, the Japanese market is overvalued by 0.5 percentage points (equivalent to about 320 yen for the Nikkei 225) relative to the NASDAQ based on the 200-day moving average deviation ratio over the medium to long term. Meanwhile, the Japanese market is overvalued by 2.9 percentage points (equivalent to about 1,860 yen for the Nikkei 225) relative to the NY Dow based on the 200-day moving average deviation ratio over the medium to long term.

 

The Japanese market is performing better than the Dow Jones and NASDAQ. The VIX, an indicator of volatility in the U.S. market, rose to 15.9 for the week. The Nikkei VI rose to 29.8 for the week. The U.S. market is in a state of “optimism,” while the Japanese market is in a state of “fear.”

 

The Nikkei 225 is trading below both its 9-day and 25-day moving averages. A “red light” is flashing for the short-term trend.

The Nikkei 225 is trading below the “Cloud” in the Ichimoku Kinko Hyo chart. The overall deviation rate stands at +0.4%, while the deviation rate from the 200-day moving average is +7.9%. Since both factors are positive, a “yellow light” is flashing for the medium-term trend.

 

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

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

The U.S. market is showing a “red light” in the short term and a “yellow 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 no trend and a short-term down trend. The Japanese market is in a medium-term no trend, and the short-term is down trend.

 

An analysis of the foreign exchange market shows that the yen has begun to strengthen, peaking at 163 yen in July 2026. This week, the exchange rate is expected to range from the 152-yen level to the 155-yen level.

 

In the U.S. markets this week, the prospect of constructive dialogue between the GCC (Gulf Cooperation Council) and Iran regarding tanker navigation temporarily halted the sharp rise in crude oil prices, but attention remains focused on how the situation will unfold. Additionally, as the Federal Reserve decides on interest rates, the impact on borrowing costs is also drawing attention. On the economic front, retail sales and industrial production figures will be released. Globally, monetary policy announcements from the UK and Japan are expected, along with the release of UK inflation data and retail sales figures, Germany’s ZEW Economic Sentiment Index, and data on industrial production, retail sales, the unemployment rate, and housing prices in the eurozone and China.

 

Last week, the Nikkei 225 traded largely within the expected range. The high was about 580 yen above the range, and the low was about 350 yen below it.

This week, the Nikkei 225 is expected to trade within a range defined by the 25-day moving average (currently around 64,310 yen) on the upside and the -2σ Bollinger Band (currently 63,560 yen) on the downside.

 

The Nikkei Average is likely to remain weak this week as well, depending on crude oil prices—which are influenced by the situation in the Middle East—and movements in U.S. long-term interest rates.