Key Points:
- Nikkei 225 rose 1.89% to close at 34,868.63, adding 648.03 points on Wednesday.
- Trump backed off threats to remove Powell, and signalled willingness to ease tariffs.
- Japan’s Composite PMI rose to 51.1 in April, returning to expansion for the first time in months.
- IMF lowered Japan’s 2025–26 growth forecast to 0.6%, citing tariff-related downside risks.
Japanese stocks staged a strong rebound this week, supported by a mix of political relief and improving domestic fundamentals. The Nikkei 225 surged nearly 2% intraday, reaching a high of 35,447.13 before settling at 35,054.13.
Risk appetite returned after President Donald Trump reversed course on removing Fed Chair Jerome Powell, opting instead to push for more aggressive rate cuts. Traders also took note of Trump’s remarks on trade, where he hinted that tariffs on Chinese imports could be “substantially” lowered, lifting export-oriented equities across the region.
In domestic data, Japan’s April flash PMIs offered the strongest signal of economic stabilisation in months. The Composite Output Index climbed to 51.1, up from 48.9 in March. Services PMI led the gains, expanding at the fastest rate in three months, while manufacturing remained stable, helping reinforce the case for a broader recovery.
That said, the International Monetary Fund tempered optimism by revising down Japan’s GDP growth forecast to 0.6% for both 2025 and 2026, citing U.S. tariff risks and slowing external demand.
Technical Analysis
The Nikkei 225 staged a strong bullish rally, climbing from the 33814.13 low to a session high of 35447.13, marking a 1,600+ point run before facing a sharp correction. The price action hugged the 5- and 10-period moving averages during the ascent, signaling persistent buying pressure.
Picture: Nikkei pares gains after surging to 35,447, but buyers regroup as momentum starts to rebuild, as seen on the VT Markets app
After peaking, price experienced a swift pullback, but support at the 30-MA held firm around the 34,660–34,700 zone. The MACD histogram shows waning bearish momentum, and the lines have begun to converge, hinting at a possible bullish crossover forming as the price pushes back toward 35,050.
If bulls maintain control above the 30-MA, we could see a fresh retest of the 35,450 resistance, with potential upside continuation. Failure to hold may invite consolidation between 34,800–35,100.
Cautious Optimism Moving Forward
Despite the IMF’s caution, sentiment has shifted in the short term. Traders are betting on a softer Fed, improving Japanese fundamentals, and a potential thaw in U.S.-China trade relations. If follow-through persists, the Nikkei may re-test the 35,500 high, with potential to trend toward 36,000 in coming sessions.
