Tokyo’s stock market on July 9 is expected to attempt a rebound from the previous day’s sharp sell-off. With US tech stocks bought back in the prior session and Chicago futures trading firmly, the Nikkei 225 is likely to start with buying momentum.
The Nikkei 225 plummeted to 68,256.96 (-1,480.73) on July 8, but Chicago Nikkei 225 futures surged to 67,800 (+990) in early trading on July 9. As the cash market converges toward this level, broad-based buybacks are highly probable across a wide range of stocks. The SOX Index, heavily weighted toward semiconductor stocks, staged a sharp rebound to 12,574.97 (+274.45), providing a tailwind for major tech names such as Tokyo Electron (8035.T) and Advantest (6857.T).
On the other hand, the Dow Jones Industrial Average fell for a second straight day to 52,348.39 (-576.76), leaving selling pressure intact, particularly for cyclical stocks. Uncertainty surrounding the Trump administration’s tariff policies and persistent concerns over China’s economic downturn continue to weigh on the market. Domestically, expectations for economic policies under the Takaichi Cabinet, including increased defense spending, are being viewed as a supportive factor.
Active share buybacks and the Tokyo Stock Exchange’s push for improved corporate value also serve as structural support for Japanese equities. Market participants note that “while this is a short-term adjustment phase, downside is likely limited as long as companies continue their efforts to improve capital efficiency.”
A series of important economic indicators are scheduled for release both domestically and internationally today. In Japan, in addition to external and internal securities investment data, June money stock, June Tokyo office vacancy rates, and June machine tool orders, the Bank of Japan will release its July Regional Economic Report (Sakura Report) and hold its branch managers’ meeting. The Sakura Report is expected to present economic assessments for nine regions nationwide, with the spread of wage hikes and the degree of recovery in personal consumption in focus.
Overseas, US initial jobless claims and June existing home sales will be released, while China will publish its June Consumer Price Index (CPI) and Producer Price Index (PPI). Market consensus expects China’s CPI to show only a slight year-on-year increase, with many viewing deflationary pressures as persistent. The PPI is also forecast to remain in negative territory, likely reaffirming weak domestic demand in the Chinese economy.
In Europe, the minutes from the European Central Bank’s (ECB) June meeting will be published, offering clues on the future pace of rate cuts. A Eurogroup finance ministers’ meeting is also scheduled.
In the US, the New York Fed President will participate in a discussion, and the Dallas Fed President will moderate a panel discussion, with their remarks on monetary policy drawing attention. The FOMC minutes from the June 16-17 meeting, released the previous day, reportedly confirmed progress in disinflation while indicating a cautious stance on rate cuts. The consistency of Fed officials’ comments with that stance is garnering market interest.
In currency markets, the dollar-yen pair is trading firmly, supported by rising US long-term interest rates, creating a continued tailwind for export-related stocks. However, some point out that the impact of the Trump administration’s tariff policies on exporters’ earnings still needs to be carefully assessed.
Regarding China, the release of June aggregate financing, money supply, and new yuan loan data is expected by the 15th, with the focus on whether the effects of monetary easing are filtering through to the real economy. Some in the market believe that “while expectations for additional stimulus measures by Chinese authorities remain strong, risk-on moves will be limited until concrete policies emerge.”
Overall, while buying is expected to lead in Tokyo today, driven by the rally in US tech stocks, the decline in the Dow and concerns over China’s economy are likely to cap upside. With a strong mood to assess key domestic and international indicators such as the BOJ’s Sakura Report and China’s CPI, the market is unlikely to move strongly in one direction.