Japanese stocks started the week on a cautious note as investors reacted to growing concerns about the US economy and a stronger yen. A recent US credit rating downgrade triggered safe-haven flows, raising fresh worries for Japan’s export-focused market.
Japanese equities kicked off the week on a weaker note, with the Nikkei 225 index dropping 0.68% to finish at 37,498.63 on Monday.
The broader Topix index remained largely unchanged, slipping just 0.08% to close at 2,738.39. A firmer yen and growing unease surrounding the US fiscal outlook contributed to the cautious market tone.
Investor sentiment soured following Moody’s downgrade of the US sovereign credit rating late Friday, highlighting America’s swelling USD 36 trillion national debt.
The move triggered fresh concerns about capital outflows from US assets, prompting a shift towards safe-haven currencies.
As a result, the yen strengthened by 0.4%, trading at 145.05 per US dollar during the Asian session.
A stronger yen typically poses challenges for Japanese exporters, as it reduces the yen-denominated value of overseas profits.
Reflecting this, tech and semiconductor stocks faced headwinds — Advantest (6857) declined 2.85%, while Tokyo Electron (8035) fell 1.7%.
The downgrade could also complicate Donald Trump’s prospects of implementing fresh tax cuts, raising fears of deeper fiscal instability that may disrupt global capital flows.
Still, not all was bleak. Daiichi Sankyo (4568) surged by 7%, emerging as the Nikkei’s top performer and providing a measure of support.
Market breadth was mixed: around 50% of Tokyo-listed stocks ended higher, 45% declined, and 3% remained flat — suggesting a tentative investor mood.
The Nikkei 225 experienced a steady pullback after peaking at 37,970.93, closing lower at 37,388.18 in the latest session.
The index has now slipped below both the 10- and 30-period moving averages on the 15-minute chart, reinforcing a bearish bias.
This downside move was accompanied by a negative MACD crossover and expanding histogram bars, both signalling increasing selling pressure.
Although a brief rebound was observed around midday on 17 May, bullish momentum faded quickly. The index has since formed a series of lower highs and lower lows, further confirming the weakening trend.
Immediate support is now seen near the 37,300 level. A break below this could trigger additional downside.
On the upside, resistance is expected around the 37,750 to 37,800 range. If the MACD starts to flatten, a period of consolidation may follow — but until the price climbs back above the 30-period moving average, the technical bias remains bearish.
While Japanese stocks continue to draw support from solid corporate earnings and expectations of ongoing monetary easing, external pressures could weigh heavily in the near term.
Persistent concerns over the US fiscal position and the risk of renewed trade tensions remain potential headwinds.
If the yen continues to appreciate, export-reliant sectors may come under further pressure.
Investors will be watching US Treasury yields and upcoming Japanese trade figures closely for additional cues on market direction.
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