Outlook for the Nikkei average this week [6 September 2026]

[Fundamental viewpoint]

In the U.S. markets last week, stock indices posted mixed weekly results amid conflicting speculation over whether the FOMC would raise interest rates at its September meeting.

Weekly percentage change: Dow Jones: -0.27%, NASDAQ: +0.40%, S&P 500: +0.09%

 

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 yield spread between the Japanese and U.S. markets indicates that the Japanese market is overvalued by 0.01 percentage points. This overvaluation stems from the difference between the S&P 500’s P/E ratio of 21.2 and the projected P/E ratio of 17.4 for the constituent stocks of the Nikkei 225 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 0.01 percentage points compared to the OECD forecast (either Japan’s forecast must be revised downward or the U.S.’s must be revised upward). Alternatively, the projected P/E ratio for the current fiscal year for Nikkei 225 constituent stocks must reach approximately 17.44. Or, the Nikkei 225 must reach approximately 65,160 yen.

Consequently, the Japanese market is overvalued by about 140 yen in the medium to long term.

From a fundamental perspective, the Japanese market could be considered slightly more attractive than the U.S. market. Last week, the Japanese market shifted into overvalued territory.

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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 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 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 +17.8%, marking an improvement of +8.2 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 1.81 to 1.88, the dollar-yen exchange rate moved in the direction of yen appreciation, falling from the 160-yen range to the 155-yen range. The Dollar Index fell 0.52% 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    The fourth week of August saw a net sell position. It is highly likely that the first week of September also saw a net sell position, and a net sell position is expected this week. Last week, out of the five factors, factor ③ was a bearish factor. This week, factors ①, ②, ③, and ⑤ are expected to have an impact.

 

[Technical viewpoint]

From a technical perspective, the Japanese market is overvalued by 1.8 percentage points (equivalent to approximately 1,170 yen when calculated based on the Nikkei 225) relative to the NASDAQ, as measured by the difference in 200-day moving average deviations. Meanwhile, the Japanese market is overvalued by 3.3 percentage points (equivalent to approximately 2,150 yen when calculated based on the Nikkei 225) relative to the NY Dow, as measured by the difference in 200-day moving average deviations.

 

The Japanese market is performing better than the Dow Jones and NASDAQ. The VIX, an indicator of volatility in the U.S. market, rose slightly to 14.5 for the week. The Nikkei VI rose to 27.2 for the week. The U.S. market is in an “optimistic” state, while the Japanese market is in a “slightly fearful” state.

 

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 +6.1%, while the deviation rate from the 200-day moving average is +10.2%. Since both factors are positive, a “yellow light” is flashing for the medium-term trend.

 

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

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

The U.S. market is showing 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 no trend, and the short-term is down 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 157 and 154 yen per dollar range.

 

In the U.S. markets this week, attention will focus on the Consumer Price Index (CPI) and Producer Price Index (PPI)—which are expected to influence the Federal Reserve’s September policy decision—amid escalating hostilities between Iran and the U.S. and expectations that the disruption to energy supplies will persist. Globally, key releases include the ECB’s policy rate decision, Germany’s industrial production index, China’s trade data and Consumer Price Index (CPI), and Japan’s Producer Price Index (PPI).

 

Last week, the Nikkei 225 fell below the expected range. The high was about 1,440 yen below the upper limit, and the low was about 560 yen below the lower limit.

This week, the Nikkei 225 is expected to trade within a range defined by the 25-day moving average (currently around 66,070 yen) on the upside and the -2σ Bollinger Band (currently 63,280 yen) on the downside.

 

This week, the Nikkei Average is likely to be influenced by uncertainty surrounding the situation in the Middle East and speculation about whether the U.S. Federal Reserve will raise interest rates in September. If expectations that U.S. long-term interest rates will rise persist, the market is likely to remain weak.