- Correction on Nikkei 225 Index after reaching historic highs
- Weaker retail sales and industrial production data
- Semiconductors - a flourishing sector in the Japanese industry
Despite the Nikkei 225 recently hitting historic highs around 31,500 points, market sentiment in Japan may be mixed at the moment. On one hand, investors are trying to evaluate the potential of the semiconductor and AI markets, while on the other hand, they are receiving weaker-than-expected data from the fundamental economy.
Just four sessions ago, the Nikkei 225 reached historic highs and came close to 30-year peaks after reaching a preliminary agreement on the US debt limit. Furthermore, the excitement in the semiconductor and AI sectors fueled the market's growth. Japan sees them as potential drivers of the country's economic development. Market drivers of this sector were Advantest, a manufacturer of equipment for companies like Nvidia, Nikon and SoftBank. The Tokyo government has recently provided subsidies to global chip companies such as Taiwan Semiconductor Manufacturing (TSM.US) for the construction of new factories or expansion of existing ones.
The recent surge slowed down around 31,500 points and today's weaker-than-expected macro data for Japan further deepens the correction. Despite retail sales still showing a solid year-on-year growth, it fell below analysts' expectations - 5.0% YoY compared to the projected 7.0%. Industrial production also declined by 0.4% on a monthly basis.
Although the data is weaker, the prospects for Japan remain promising. Therefore, the upcoming sessions will show whether the current correction is just a correction or the beginning of deeper declines. Wall Street sentiment will play a crucial role, as macro data is beginning to indicate an approaching recession. The condition of the job market will be critical in this context, with the ADP report for May scheduled for Thursday and unemployment data on Friday.
Nikkei 225 (JAP225) with a correction, if the current direction is maintained, the index will likely test support at the 30,660 level, D1 chart, source xStation 5.
