JP 225 forecast: the index hits new all-time high

The JP 225 stock index has broken above the resistance level and reached a new all-time high. The JP 225 forecast for today is positive.

JP 225 forecast: key takeaways

• Recent data: Japan Tokyo core CPI declined to 2.00% year-on-year
• Market impact: the effect on the Japanese stock market is moderately negative

JP 225 fundamental analysis

The decline in Tokyo core inflation to 2.0% year-on-year, compared to expectations of 2.2% and the previous reading of 2.3%, is perceived by the market as a signal of easing price pressure. For investors, this indicator is important not only in itself, but also as a guide to the likely trajectory of nationwide inflation and, accordingly, future decisions by the Bank of Japan. Weaker inflation typically reduces the likelihood of imminent monetary policy tightening and lowers expectations for interest rate increases in the economy.

For the JP 225 index, this signal is moderately positive in the baseline scenario. If the market concludes that the Bank of Japan will act more cautiously, this supports equity valuations through lower borrowing costs and more favourable financial conditions for businesses. The currency channel is also important: softer rate expectations more often lead to a weaker yen, or at least reduce the risk of its sharp appreciation.

JP 225 technical analysis

The JP 225 index maintains its upward momentum. The key support level is located at 52,340.0, while the nearest resistance level at 54,180.0 has been broken. The current rise is highly likely to be medium-term, with the next potential target at the 56,060.0 area.

The JP 225 price forecast considers the following scenarios:

• Pessimistic JP 225 scenario: a breakout below the 52,340.0 support level could send the index down to 49,705.0
• Optimistic JP 225 scenario: if the price consolidates below the previously breached resistance level at 54,180.0, the index could climb to 56,060.0

Summary

Overall, the decline in Tokyo core inflation to 2.0% improves the short-term backdrop for the Japanese equity market and the JP 225 index by reducing the likelihood of rapid tightening by the Bank of Japan and through a favourable currency factor for exporters. At the same time, the sustainability of the market reaction will depend on whether the slowdown in inflation is perceived as a healthy normalisation of price pressures or as a signal of weakening domestic demand, as well as on how the yen and the bond market respond to the release. The next upside target for the JP 225 is the 56,060.0 level.

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