Japanese stocks experienced a downturn on december 30,2024,marking the last trading day of the year,as investors took profits following a recent surge. The Nikkei 225 fell 1% to close at 39,894.54 yen, while the TOPIX index dropped 0.6%, reflecting a broader trend influenced by declining US markets.Export-driven sectors, notably electronics and automobiles, faced significant selling pressure. Despite this setback, both indices posted impressive annual gains of 19% and 18%, respectively, with the Nikkei average surpassing the 40,000 yen mark for the first time in five months. As the year concludes, analysts suggest that the market may stabilize, especially with potential interest rate hikes from the Bank of Japan on the horizon.The japanese yen experienced a slight dip in the Tokyo foreign exchange market, trading at around 158 yen to the dollar, as year-end market activity saw increased dollar buying amid a lack of participants. analysts, including Marito Ueda from SBI liquidity Market, noted that while the yen is being sold gradually, aggressive selling is expected at the start of the new year, influenced by ongoing monetary policies in Japan and the U.S.Concerns remain about the potential for further yen depreciation, especially with the upcoming announcement of U.S. tariff policies during President-elect Donald Trump’s inauguration. Market experts advise caution as overseas investors may increase yen selling in anticipation of capital flows related to Japan’s new Small Investment Tax Exemption System (NISA).
Japanese Stock Market dynamics: Year-End Analysis with Expert Insight
Interview with Marito Ueda,Analyst at SBI liquidity Market
Editor: Welcome,Marito.As we approach the end of 2024, Japanese stocks faced a downturn on the last trading day, December 30. Can you share your thoughts on this downturn and its relation to the recent market trends?
Marito Ueda: Thank you for having me. The drop we witnessed, with the Nikkei 225 falling 1% to close at 39,894.54 yen, can largely be attributed to profit-taking by investors following a significant surge earlier in the year. both the Nikkei and TOPIX indices posted remarkable annual gains of 19% and 18%, respectively, marking a remarkable year for the market. though, as the year concludes, it’s natural for investors to recalibrate their positions, especially in light of a broader headwind from declining U.S. markets influencing sentiment here.
Editor: With export-driven sectors such as electronics and automobiles experiencing significant selling pressure, do you believe these sectors will rebound in the new year?
Marito Ueda: I think we should moderate our expectations. While these sectors are foundational to Japan’s economy, they also face challenges from global supply chain issues and geopolitical considerations. However, they have the potential for a rebound if domestic demand picks up and global markets stabilize. Our focus should also be on how these sectors will adapt to future innovations and increased competitiveness.
Editor: You mentioned potential interest rate hikes from the Bank of Japan. How might this impact the overall market dynamics?
Marito Ueda: The anticipated interest rate hikes could introduce some volatility in the short term. However, if managed carefully, these hikes could stabilize the market by encouraging a stronger, more resilient economic habitat. Increased interest rates could also strengthen the yen, but this comes with risks of making Japanese exports more expensive globally.It’s a balancing act that the Bank of Japan will need to navigate adeptly.
Editor: Speaking of the yen, it experienced a slight dip, trading around 158 yen to the dollar. What factors are influencing this, and what do you forecast for the yen in the coming months?
Marito ueda: The yen’s weakness is influenced by year-end market activity and an uptick in dollar buying, especially with fewer participants in the Tokyo foreign exchange market. As we enter the new year, aggressive selling of the yen is expected due to ongoing monetary policy dynamics both in Japan and the U.S. Additionally, the upcoming proclamation of new U.S. tariff policies during President-elect Trump’s inauguration could exert downward pressure on the yen.
Editor: There are concerns about potential further depreciation of the yen. What practical advice can you offer to overseas investors amidst these dynamics?
Marito Ueda: Investors should exercise caution. With the introduction of Japan’s new Small Investment Tax Exemption System (NISA), there may be increased capital outflows that could exacerbate yen selling. A strategic approach would involve closely monitoring economic indicators both domestically and internationally. Investors should also consider diversifying their portfolios to manage risks associated with currency fluctuations and evolving market conditions.
Editor: Thank you for shedding light on these critical aspects of the Japanese stock market, Marito. Your insights will undoubtedly help our readers navigate the complexities of investing as we head into 2025.
Marito Ueda: It was a pleasure discussing these significant topics. There’s much to watch in Japan’s economic landscape, and I hope investors remain informed and prepared for the opportunities ahead.