The Japanese Nikkei 225 (JP225) index contract is extending yesterday's rebound by an additional 0.9%, approaching a bullish test of the 30-day exponential moving average (EMA30). Optimism in the Asian session is not only due to high expectations for de-escalation of the Middle East conflict following Donald Trump's comments but also excellent data providing hope for an economic recovery in Japan for the first time in a long while.
JP225 is currently sitting just below the EMA30 and the 38.2% Fibonacci retracement level of the latest downward wave, with a neutral RSI enabling further gains. While optimism based on Trump’s interviews remains fragile, Japan's fundamentals appear to have prospects for real improvement. Source: xStation5
What is driving JP225 today?
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Donald Trump suggested a near end to war in Iran, emphasizing that U.S. progress is significantly further along than the 4-5 week plan prepared for the operation. Global markets immediately fell into euphoria; the US100 contract is gaining approximately 0.9%, and the VIX fear index is collapsing by 4.3%. All of Europe is also in the green (EU50: +0.8%).
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The final reading of Japanese GDP for Q4 2025 was revised upward, erasing investor pessimism following the previous GDP pullback caused by the chaos of U.S. trade policy in 2025. Quarter-on-quarter growth was raised from a disappointing 0.1% to 0.3% (1.3% annualized growth).
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The main driver was corporate capital expenditure (1.3% Q/Q vs. 0.2% forecast), as companies—following a period of solid results, subsiding uncertainty, and still-loose monetary policy—decided to allocate significantly more funds toward business development.
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For the first time in over a year, an increase in real wages was also recorded (+1.4%), which translated into consumption growth among the Japanese (+0.3% Q/Q vs. 0.1% forecast). Large expenditures during the holiday season and general optimism regarding solutions proposed by Prime Minister Takaichi to lower the cost of living (e.g., 0% VAT on food or reduced energy fees) were also favorable.
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