The Nikkei 225 (JP225) continues to decline, losing nearly 0.85% today and testing levels below 52,000 points, which means it is under pressure for the third session in a row. The main catalyst is profit-taking in previously heavily discounted AI and semiconductor companies – SoftBank Group is down more than 4%, while Tokyo Electron and Advantest are also seeing solid declines. The index, which recently broke records thanks to optimism surrounding artificial intelligence, is now correcting after a sharp rise fuelled by speculation on Nvidia chips and related stocks. Added to this is the disastrous data on real wages, which fell by 2.8% y/y in November – the sharpest decline since January.
However, the greatest burden remains the escalating geopolitical tensions with China, which dominate today's headlines. Beijing announced an immediate ban on exports of dual-use goods (with both civilian and military applications) to Japan, including potentially rare earth metals, in response to comments made by Prime Minister Sany Takaichi about Taiwan. Japan, which depends on China for approximately 60-70% of its supply of these raw materials (almost 100% for heavy metals such as dysprosium and terbium), faces a real risk of disruption to its supply chains for the automotive, electronics and defence industries. Nomura estimates that a three-month embargo could cost the economy 660 billion yen (USD 4.2 billion) and reduce GDP by 0.11 percentage points.
The mood is not helped by MOFCOM's anti-dumping investigation into imports of dichlorosilane from Japan, a key chemical component in chip production, a7> and the announced reinstatement of the ban on imports of Japanese seafood (mainly fish and other marine food products) in retaliation for Japanese Prime Minister Sany Takaichi's comments on Taiwan and alleged problems with water from Fukushima.
Despite the aforementioned discounts, which have been going on for three days now and are mainly driven by selected geopolitical and economic factors, the JP225 contract maintains a long-term upward trend, technically supported by the 50-day exponential moving average (blue curve on the chart). The upper limit of the current technical setup remains the local double peak in the 52,780 point zone. The RSI for the 14-day average falls below the 70 point zone, which is often identified as an indication of the underlying instrument being overbought.
Source: xStation
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