Japan’s Nikkei hit record high until end-2025

By Kevin Buckland

TOKYO (Reuters) – The 225-share average will extend its recovery from its biggest selloff in 37 years into the rest of 2024 before reaching an all-time high by the end of next year, a Reuters poll forecast.

The Nikkei will rise 7 percent to 40,000 by the end of the year, before reaching 42,000 by the end of June and then a record 42,500 by the end of 2025, the median forecast in an Aug. 8 poll showed August 20 a 18 analysts. Japan’s benchmark stock index closed Monday at 37,388.62.

“Valuations remain attractive, interest rates remain low and corporate reforms continue to progress,” said Tony Sycamore, market analyst at IG.

The Nikkei could suffer another pullback in 2024 “as the Bank of Japan continues to raise rates and due to higher volatility in global markets,” Sycamore said.

“However, given the much cleaner yen positioning, I would expect this to play less of a role later in the year.”

The Nikkei hit an all-time high of 42,426.77 on July 11, but then pulled back sharply amid a dramatic yen recovery from its weakest since late 1986.

Traders ditched Japanese currency-backed trades en masse after the BOJ unexpectedly switched to a dovish stance, while a slew of weak US economic data fueled bets that the Federal Reserve should rush to cut rates interests.

Surprisingly weak payrolls data earlier this month was the catalyst for the Nikkei to fall 12.4% on August 5, hitting its lowest level since Halloween and ending with its biggest one-day drop since Black Monday since 1987.

Since then, improved U.S. macro indicators and a backtracking by the BOJ have stabilized equity markets, with analysts broadly expecting strong financial results and momentum from corporate reform – led by the Tokyo Stock Exchange and supported by government – which lifted the Nikkei earlier in the month. year to continue supporting him next year.

Eleven of the 13 analysts who responded to a supplemental earnings question predicted they would beat expectations for the rest of this year.

However, analysts were divided on the likelihood of higher near-term volatility, with six in 13 respondents saying a further correction of 10% or more was likely for the Nikkei by the end of September, compared with seven who said it was unlikely.

“The share price has already fallen and appears to be undervalued,” said Hiroshi Namioka, strategist and fund manager at T&D Asset Management, who does not foresee another pullback in the near term.

“Institutional investors with short time horizons, such as one year, may be reluctant to buy, but for individual investors with long-term investments, this big drop appears to have been an extremely attractive buying opportunity.”

(Other stories in Reuters Q3 global stock market survey package)