Nikkei Index breaks another ceiling… "Heading to 45,000 by year-end"

Up 1.3% on upbeat US stock market

Two straight days of record highs

Surpasses 43,000 for the first time ever

Nomura: "Expecting 45,000 by year-end"

Warnings of 'overspeed'… "Better fasten your seatbelt"

The Japanese Nikkei Index continues its upward trend, setting new all-time highs day after day. As concerns that the Trump administration's tariff policies would accelerate inflation have eased, buying momentum among investors expecting a Fed rate cut has also spread to the Japanese stock market. Analysts believe there is a high probability the Nikkei Index will rise further by year-end.

On the 13th, the Nikkei Index closed at 43,274.67 on the Tokyo stock exchange, up 1.30% from the previous day. By rising into the 43,000s, it renewed its all-time high for the second consecutive day. With expectations for a Fed rate cut growing, foreign funds have increased their buying of Japanese equities as they embrace more risk-taking. On this day, companies such as Sony Group and Mitsubishi Heavy Industries also hit their highest share prices since listing.

The US Consumer Price Index (CPI) for July, released on the 12th, was almost in line with market expectations, and the US stock market showed gains that day. Considering the slowdown in the US labor market, analysts noted that this level of inflation is unlikely to prevent a Fed rate cut.

Given the solid US economic backdrop, the resumption of rate cuts is expected to be a 'precautionary rate cut' to proactively respond to potential future economic downturns. The market recalls that during past periods of precautionary US rate cuts, such as in 2019, global stock markets experienced significant rallies.

Improved investor sentiment driven by hopes of a precautionary rate cut is also spreading through the Japanese stock market. According to the results of BofA's August institutional investor survey released on the 10th, the net 'overweight' minus 'underweight' position in Japanese stock holdings—relative to initial allocations—stood at -2%, which has improved to an almost 'neutral' stance.

Tetsuhiro Nishi, executive officer at Nomura Securities, told reporters the previous day, "Foreign investors still hold short (selling) positions in Japanese stocks as of the start of this year," highlighting the potential for further strengthening of the buying trend. Regarding the outlook for the Nikkei Index, he said, "We see 45,000 by year-end as a possibility."

The Nikkei Index has risen about 3,000 points over six trading days, raising concerns about 'overspeed.' Nihon Keizai Shimbun pointed out, "Once the momentum-driven rally phase passes, a significant correction is possible depending on circumstances," and "As stock price outlooks grow increasingly optimistic, now is the time for investors to fasten their seatbelts even tighter."

Tokyo correspondent: Ilgyu Kim