Japan’s Upswing May End Soon
Japan’s stock market appears to be at a decisive point, one that will determine whether 3-month up-cycle that has remained in place will continue. Notes, technical indicators are giving bearish signals, with Nikkei having fallen below its 52-week moving average and 100-day advance/decline ratio dipping below 95%, pointing to possibility that Japanese shares could remain weak through September. In Today’s trading, the Nikkei Index dipped down to 9378.23, down below its’ previous inter-day 2010 low. This is a critical technical development to watch as going forward with Japanese equity investment.
New Prime Minister Naoto Kan will be judged depending on whether he can rein in finances and promote economic growth, promises unfulfilled by predecessor Yukio Hatoyama. Both Nikkei and Topix both lost over 7.0% during Hatoyama government. Investors see Kan as advocate for weaker yen, often viewed as positive for Japan’s export-oriented market. It would hardly be surprising if Kan envisioned a scenario in which a weaker yen pushed stock prices higher. But analysts say equity market recovery is unlikely unless Kan implements credible policies to lift the broader economy.
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