Nikkei 225 forecast as the USD/JPY spikes to a record high

on Oct 12, 2022
  • The Nikkei 225 index has fallen by more than 8% this year.
  • It has outperformed other indices like DAX and Dow Jones.
  • The index crashed as the Japanese yen plunged to an all-time low.

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The Nikkei 225 index has outperformed its global peers in 2022 as investors focus on low-interest rates and the plunging Japanese yen. The NI225 index has crashed by about 8.4% in 2022, which is better than its peers like the Dow Jones, S&P 500, and DAX, which have crashed by more than 20% this year.

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Japanese yen crashes

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The Nikkei 225 index has done better than its key peers because of the tone of the Bank of Japan. Unlike its global peers, the BoJ has remained adamant about its monetary policy. It has left its interest rates in the negative zone and continued with its quantitative easing (QE) policies. 

In the same period, the Federal Reserve has hiked interest rates by 300 basis points and hinted that it will continue the process. Analysts expect the bank will hike rates by 75 basis points in November and 50 basis points in December. In addition, the Fed has implemented a quantitative tightening (QT) policy that is reducing its balance sheet.

The same trend is happening in other countries. In Europe, the European Central Bank (ECB) has delivered several rate hikes this year. At the same time, other popular banks like Bank of Canada (BoC), Reserve Bank of Australia (RBA), and the Bank of England have all hiked rates.

The decline of the Nikkei 225 index has happened as the Japanese yen continued slipping. The USD/JPY price soared to an all-time high of 146.4, meaning that it has risen by over 30% this year. 

A weaker Japanese yen has an impact on Japanese companies. Companies that focus on imports benefit since a weak Japanese yen makes their items affordable. For importers, however, a weak currency makes it more expensive to buy goods.

The worst-performing Nikkei index stocks of 2022 are Tokyo Electric, Rakuten, Z Holdings, and Recruit Holdings among others. Some of the best performers are JGC Corp, Mitsubishi Heavy Industries, Fujikura, and Mitsubishi Motors.

Nikkei 225 forecast

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nikkei 225

The daily chart shows that the Nikkei index has been in a bearish trend in 2022. It has fallen by more than 14% from its highest level in 2021. Along the way, it has fallen below the 38.2% Fibonacci Retracement level. It has fallen below all moving averages.

Therefore, with the Japanese yen crashing, there is a likelihood that the Nikkei 225 index will continue falling as sellers target the key support at ¥25,000.


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