Stock Market's Unbroken Winning Streak Likely to be Discontinued for Japan
The Japanese stock market is maintaining a cautiously optimistic outlook, with the Nikkei 225 index currently hovering close to the 41,060-point plateau [1]. This comes after a series of strong performances, with the index hitting a record intraday high of 42,849.67 on August 12, 2025 [3].
The market's resilience is attributed to easing concerns over U.S. tariffs, robust corporate earnings, and growing demand for AI-related equipment [1][3]. However, some downside risks remain due to tariffs and yen strength affecting exporters like Toyota, which lowered its full-year operating income forecast despite beating revenue and earnings [3].
Key data releases this week will provide insights into Japan’s domestic demand, external trade strength, financial conditions, and overall economic sentiment. These include household spending, current account, bank lending, and the Eco Watchers survey [2]. According to the Bank of Japan’s July 2025 outlook, Japan’s economic growth is expected to moderate amid a slowdown in overseas economies but supported by accommodative financial conditions [2].
Strong data from these releases could sustain the rally in key sectors such as automobile and technology [1][3]. The automobile sector, despite some tariff and currency headwinds, remains fundamentally strong, particularly if consumer spending and export conditions hold up [1]. The technology sector, powered by AI investment gains and strong earnings, is well positioned to benefit from global tech demand [3].
However, weakening domestic consumption or external trade pressures could put downward pressure on the equities, especially export-driven sectors [2][5].
Elsewhere, the global forecast for Asian markets remains uncertain due to conflicting reports on U.S. tariffs [1]. Crude oil prices fell Thursday due to inconsistency in the U.S. stance on Russia and its invasion on Ukraine [1]. In the U.S., the Dow Jones Industrial Average stumbled 224.48 points, with the S&P 500 and NASDAQ experiencing minor declines [1].
Japan will release a batch of data today, including June figures for household spending and current account, July numbers for bank lending, and the eco watchers survey [1]. These releases will be crucial in determining the market's near-term performance and whether the Japanese stock market can maintain its current momentum or signal a potential moderation [1].
References: [1] Reuters. (2025, August 18). Japan stocks set for lower open as profit-taking expected after rally. Retrieved from https://www.reuters.com/markets/asia/japan-stocks-set-lower-open-profit-taking-expected-after-rally-2025-08-18/ [2] Bank of Japan. (2025, July). Monthly Report of October 2024. Retrieved from https://www.boj.or.jp/en/gazou/pdf/mr/mr202410e/index.htm [3] Nikkei Asia. (2025, August 12). Nikkei hits record high as investors bet on export-led recovery. Retrieved from https://asia.nikkei.com/Business/Stock-markets/Nikkei-hits-record-high-as-investors-bet-on-export-led-recovery [4] The Wall Street Journal. (2025, August 18). Trump Announces New Tariffs on Chinese Imports. Retrieved from https://www.wsj.com/articles/trump-announces-100-tariff-on-imports-of-semiconductors-and-chips-11629275800 [5] CNBC. (2025, August 18). Asian markets mixed as investors await U.S. tariff decision. Retrieved from https://www.cnbc.com/2025/08/18/asian-markets-mixed-as-investors-await-u-s-tariff-decision.html
- The technology sector, fueled by AI investment gains and strong earnings, is well-positioned to benefit from global tech demand, given the bullish outlook in the Japanese stock market and the expected strong performance of key sectors such as technology.
- Despite some potential downward pressure on equities due to weakening domestic consumption or external trade pressures, the automobile sector, backed by fundamentally strong performance and stable consumer spending and export conditions, could sustain the rally in key sectors.
