NIKKEI225 Remains Flat Despite Global Rally Backed by Fed Expectations
Global stocks gain ground as investors see chances of a rate Cut from the Fed grow. Japanese stocks are weighed down by BoJ hike risk.
- US Inflation data gives investors perception Fed is on track to cut rates
- BoJ meeting next week leaves NIKKEI225 directionless
- Core Inflation YoY rose less than forecast
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The NIKKEI225 opened today down 0.10% after closing down 0.05% yesterday. A sharp contrast to global stock which closed up yesterday after US Inflation data. The NAS100 popped 1.94% yesterday and is up 0.70% today.
US Inflation Implications for the NIKKEI225
US Inflation was only partly softer than expected. With Core Inflation YoY printing a lower number that forecast at 3.2 compared to 3.3% predictions.
The Inflation YoY rate came in as forecast at 2.9% slightly higher than last month at 2.7%. Enough to create the perception that the Fed may act sooner than later in loosening policy.
The implications of a rate cut in the US have helped major indices such as the FTSE or DAX, but the NIKKEI225 has seen no benefit. Lower rates in the US are likely to help the ECB or BoE in the application of their policies.
But for the BoJ lower rates in the US are going to complicate their tightening view. Investors will be attracted to the lower interest rate scenario in the US compared to the rising interest rate scenario in Japan.
NIKKEI225 Live Chart
BoJ Policy Meeting Next Week
Investors in Japanese stocks are turning their attention to the BoJ policy meeting next week. The risk of a rate hike cannot not be dismissed given recent comments by central bank officials.
On Tuesday, Deputy Governor Himino stated that wage growth is likely to remain strong over 2025. The following day the Governor of the BoJ also echoed his statement saying that Japan was progressing to the 2% inflation target.
They also both mentioned that the central bank would debate whether to raise interest rates at the next meeting. I see this statement as an indication that there is a strong possibility the board could hike rates.
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