Nikkei Rally Continues

The recent breakout trade in the NIKKEI has now hit its final target at the 30502.8 level. The increasing optimism around rising vaccination rates in Japan has been a big contributing factor for the rally. This week, Japan passed the US in terms of the percentage of the population having received the first dose of the vaccine along with 51% of the country now being fully vaccinated. Along with this, there is fresh optimism around a potential political change in the upcoming elections after the current PM announced he will not be running for election. The PM’s main contender, Fushida, is calling for a sweeping new stimulus package which would support stocks. With this in mind, the outlook remains bullish for the Nikkei though there is room for correction in the near term given the velocity of the recent move.

Key Data to Watch

Little on the slate for Japan this week and so the main focus will be on US data and risk flows. Any data misses for the US should see the Nikkei continue higher, diluting near-term Fed tapering expectations. However, any data beats might see the Nikkei correct if USD sees any meaningful upside action.