Here’s why the Nikkei 225 index could spike to ¥30,000

The Nikkei 225 index has been in a strong bullish trend in the past few weeks after Japan stocks received a thumb of approval from Warren Buffett. The index jumped to a high of ¥28,678, the highest point since March 9 of this year. It has soared by more than 11% from the lowest level this year.

Warren Buffett’s Japan investments

The most recent Japan news was a visit by Warren Buffett, one of the biggest investors in the world. In an interview, with CNBC, Buffett talked about his investments in Japan’s saga shoshas. He started investing in the five companies – Marubeni, Itochu, Mitsubishi, Sumitomo, and Mitsui – in 2020. In that period, he has made a profit of over $4 billion, even after accounting for the weakness in the Japanese yen.

Warren Buffett has committed to invest more money in Japan. And to do that, he has announced a bond sale worth about $1.2 billion to invest in these companies. Therefore, this means that some foreign investors will likely invest in Japan. One of these investors is Man Group, a leading UK hedge fund, which has started investing in Japan stocks. In a statement, Jeff Atherton of Man Group said:

“The news of Buffett’s investment has an effect on sentiment, but also hopefully an effect on foreign money actually coming into Japan, which hasn’t happened for many years.”

Many Nikkei 225 index constituents have been in the green in 2023. Kobe Steel share price has jumped by more than 61.5% this year, making it the best-performing stocks. Dai Nippon Printing, Toppan Printing, Yokohama Rubber, and Advantest Corp shares have jumped by more than 30% this year. 

Japan’s sogo shoshas have also risen this year as Warren Buffett has boosted his stakes. Marubeni stock has risen by 27% while Mitsubishi, Mitsui, and Sumitomo have all jumped by double digits. 

On the other hand, the worst performers in the Nikkei index are Sumitomo Dainippon Pharma, Dai-ichi Life, Eisai, Fujikura, Recruit, Softbank, which have dropped by more than 8%.

Nikkei 225 index technical analysis

Nikkei index chart by TradingView

The 4H chart shows that the Nikkei index has been in a bullish trend in the past few months. This is in line with other global indices like the Euro Stoxx 50, which I wrote about here. It has moved above the 25-day and 50-day exponential moving averages (EMA) while the Relative Strength Index (RSI) and Stochastics have risen. Therefore, there is a likelihood that the Nikkei index will have a bullish breakout as buyers target the psychological level at ¥30,000.