Nikkei 225 Index outlook: top catalysts that will move Japan stocks this week

The Nikkei 225 Index rose on Monday, helped by the ongoing technology stocks rebound. It jumped by 1.65%, reaching a high of 66.130, its highest level since August 28, and nearly 10% above its lowest level in July this year. This article looks at the top catalysts that will drive the index this week.

Nikkei 225 Index to react to technology stocks' comeback

The ongoing Nikkei 225 Index rebound is being driven by technology companies as investors receive more information about the upcoming Anthropic IPO. Softbank stock soared by 8.26%, while Kioxia Holdings jumped by 7.60%. Tokyo Electron and Advantest soared by nearly 5% each.

These stocks are reacting to the ongoing tech stock rebound. A closer look shows that most memory stocks, including popular names like Micron, SanDisk, Samsung, and SK Hynix have rebounded by double digits from their lowest levels in June.

They are also rising as traders wait for the upcoming Anthropic IPO that will value it at $2 trillion. OpenAI, which SoftBank has invested in, will then follow. These IPOs will likely lead to more demand for technology companies.

The stocks are also jumping as investors predict that the AI industry has more room for growth. This became clear during the recent earnings season when most companies published strong numbers and boosted their outlooks.

Key Japanese macro numbers

The Nikkei 225 Index will also react to some notable macro data from Japan. These numbers will start coming out on Tuesday when the statistics agency releases its GDP numbers. 

Economists expect the data to show that the economy grew by 0.3% QoQ in the second quarter and by 1.1% on a YoY basis. This growth is being driven by external demand as the technology sector boom continues. Capital expenditures are expected to drop by 1.2% during the quarter. 

Japan will also release the latest producer price index (PPI) data on Friday. These numbers are important because they will help the Bank of Japan (BoJ) when its making its interest rate decision next week.

Economists expect that the bank will hike interest rates by 25 basis points, which will bridge the gap between the Fed and the Bank of Japan. Such a move will help to reduce Japanese yen’s role as a carry trade funding currency.

US inflation data

In line with the previous point, the Nikkei 225 Index will react to the upcoming US inflation report that is coming out on Thursday and Friday. The PPI and CPI are expected to show that US inflation remained above the 2% target as gasoline and diesel prices continued rising. 

A higher-than-expected inflation report will point to more Fed tightening, with odds that the bank will hike in September rising on Polymarket and Kalshi. These odds jumped after the US published a strong nonfarm payrolls (NFP) report.

Trump has threatened that he will “stop trading” with all countries with which the US has a deficit unless the Fed slashes rates. Japan has a big trade surplus with the United States, meaning that it may be targeted.

In addition to all this, the Nikkei 225 Index will react to the activity in the bond market, where yields have continued rising in the past few months. Rising bond yields has an impact on the stock market since some investors tend to rotate to the higher-yielding bonds,.