Japan Research Pack

The Nikkei 225 closed up 317 at 20,177 on 2 June. This sharp rise ensured that theindex recovered to above the 20,000 mark for the first time in about 18 months, havingremained in the high 19,000s since late December 2016.

    Although the Nikkei 225 rose by a sharp 526 over the past two days, RSI of 60.3% wasbelow the 70% benchmark indicating overpurchasing, on which basis we still see noparticular overheating. We see the 24 June 2015 close of 20,868 as our near-termupside target. If the index falls, we think it will find support around 19,500, where thereare a number of key junctures, including the 25-day moving average (19,692 as of 2June) and the 2 March intraday high of 19,668 (Figure 1).

    The 2 June close was higher than the 20 August 2015 intraday low of 20,033, therebyclosing the gap that opened up between 20 August and 21 August 2015. Japanesestocks underwent a rapid correction at the time, pulled down by a global decline inshare prices triggered by devaluation of the Chinese yuan. With the index now havingclosed the gap, it is back where it started before the correction (Figure 1). If the Nikkei225 moves above the 20,868 high of its previous upward phase, we see the nextupside target as the 26 June 1996 close of 22,666 (Figure 2).