The Nikkei 225 Index pulled back last week as market participants focused on key Japanese earnings and the BoJ interest rate decision. It retreated to a low of ¥40,800, down from the year-to-date high of ¥42,040. Here are the top catalysts for the Nikkei Index this week.
Bank of Japan interest rate decision
The Nikkei 225 Index pulled back after the BoJ announced its interest rate decision. As widely expected, the bank decided to leave interest rates unchanged at 0.50%.
In a statement, Kazuo Ueda, the bank’s governor, said that the future interest rate cut or hike will be determined by a number of factors, including inflation. He blamed the recent inflation spike to the country’s soaring food prices.
Analysts now expect that the BoJ will hike interest rates in the October meeting as the bank fights inflation. In a note, a Bloomberg analyst said:
“Until tariffs are seen as damaging US growth and bringing Fed cuts back into play, the market has a window to focus on Japan’s sluggish economy and deeply negative real yields, both of which will weigh on its currency.”
Key Japanese earnings
The other top catalyst for the Nikkei 225 Index will be the upcoming earnings by some of its top constituents. While big names like Hitachi, Sumitomo Mitsui, Mizuho, and Mitsubishi Electric have published their results, many more firms are yet to do so.
Mitsubishi UFJ Financial, a top Japanese company worth $157 billion, will publish its results on Monday. Analysts expect its results to be strong, judging by the other bank results.
Japanese banks have benefited from the BoJ interest rate hikes, which have pushed the base lending rate to 0.50%. While small, it is a major shift as the bank maintained negative rates for years.
Mitsubishi, the $75 billion company, will release its results on Monday. Recruit Holdings, the parent company of Glassdoor, Indeed, and RGF will release its numbers on Tuesday.
Other major Nikkei 225 companies that will release their numbers on Tuesday are Mitsubishi Heavy, NTT Data, Daikin, Suzuki Motor, and Yamaha Motor.
More firms like Honda Motor, Sony, Tokio Marine, Softbank, Rakuten, and Japan Post will release their numbers.
Japan tariffs on the US
The other catalyst for the Nikkei 225 Index will be the start of the US tariffs on Japanese goods on August 7. In a recently announced deal, Japan agreed to have the United States charge its goods a 15% tariff.
The country also agreed to invest $550 billion in the United States. Analysts expect these tariffs to hurt some critical Japanese companies like Toyota and Honda that ship thousands of vehicles to the US.
Japan macro data
The Nikkei 225 Index will react mildly to some key macro data and events from Japan this week. For example, the Bank of Japan (BoJ) will publish minutes of its last meeting on Tuesday. These minutes will provide more information about the deliberations that happened in the last meeting.
The other key data to watch will be the composite and services PMI report on Tuesday, and overtime pay on Wednesday. Japan will publish the latest coincident and leading economic index on Thursday.
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