The Nikkei 225 Index held steady near its all-time high in the third week, continuing the strong bull run that has been going on for years. It was trading at ¥53,770, up sharply from the 2022 low of ¥24,200.
Japan stocks continued their rally as traders reacted to earnings by some of the biggest companies in the country, including Mitsubishi UFJ, Mitsubishi Heavy, Marubeni, Nintendo, and Mitsui.
Japan stocks jump ahead of election
The next important catalyst for the Nikkei 225 Index will be the upcoming election, which will solidify Sanae Takaichi’s reign. Polls and experts believe that she will win by a landslide, a move that will usher in a period of more government spending and tax cuts in the country.
Takaichi has already announced a big $175 billion stimulus meant to ease the cost of living as inflation remains elevated in Japan. She has promised to deliver more tax cuts once she becomes elected as the Prime Minister.
The Nikkei 225 and Topix indices will likely continue rising when the election ends on February 8.
However, a victory could lead to some challenges, including the Japanese yen crash. Data shows that the USD/JPY exchange rate has risen in the last four consecutive days and is slowly nearing the year-to-date high of 159.40. It has jumped by over 12% from its lowest level in 2025, raising odds that the Trump administration will intervene.
More Nikkei 225 Index companies will release the earnings in the coming days. Mitsubishi, Nippon Telegraph, Suzuki, Fujifilm, Tokyo Electron, Itochu, and Subaru will release their numbers on Thursday and Friday.
Other companies to watch next week will be Honda Motor, Recruit Holdings, Fujikora, Japan Tobacco, Softbank,, and Tokio Marine will publish their earnings.
The Nikkei 225 Index has done well as foreigners continue to accumulate. Data compiled by TradingEconomics shows that foreigners bought Japan stocks worth over ¥494 billion and bonds worth over ¥713 billion last week.
Sony stock jumped by 6% on Thursday, making it one of the best-performing companies in Nikkei 225 Index. It reported a 22% improvement in profit and boosted its forward guidance. It now expects to make an operating profit of $9.8 billion in the quarter to March.
Nikkei 225 Index technical analysis
Nikkei 225 Index chart | Source: TradingView
The daily timeframe chart shows that the Nikkei 225 Index has been in an uptrend in the past few years, mirroring the performance of the global stock market.
The bull run has faded recently as investors waited for the upcoming elections. It has remained above all moving averages, a sign that the bull run is continuing.
However, it has formed a rising wedge pattern, which is made up of two ascending and converging trendlines, which are nearing their peak.
The Relative Strength Index (RSI) and the MACD indicators have formed a bearish divergence pattern. Therefore, the index will likely retreat in the coming days, potentially to the key support level at ¥52,000. A move above the all-time high of ¥55,070 will point to more gains.
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