Nikkey225: The Bank of Japan will continue a large-scale economic softening program

Nikkey225: The Bank of Japan will continue a large-scale economic softening program

8 February 2018, 12:21

As the Customs Department of Japan announced today, Japan's foreign trade surplus rose by 16.2 billion yen in December to 583.9 billion yen in annual terms (the previous value was 181.0 billion yen and the forecast was expected to increase to 567.7 billion yen). The economy of Japan is highly dependent on exports, and as a result, the growth of trade surplus indicates the growth of the country's economy. The growth in demand for Japanese exports leads to a positive growth in the trade balance, replenishment of the state budget and is a positive factor for JPY and for the Japanese stock market, although, as a rule, the yen and the stock market of Japan are moving in opposite directions.

Even today, despite the weakening of the yen, the main Japanese stock index Nikkey225 rose during the Asian session. Nevertheless, although the Japanese Nikkei has grown today, the index can still record the worst weekly dynamics in two years. Following the results of bidding in Asia, the Nikkei225 climbed 1.1% to 21890.00 points on the background of the growth of most export sectors. However, investors so far prefer to refrain from buying shares of leading export companies because of fears about volatility in the US.

"We must not allow ourselves to be influenced by the decline in the stock markets that we have just witnessed", Jens Weidman, president of the Bundesbank, said in a statement on Thursday that "the US stock indices grew for a long time without noticeable correction".

Head of the Bank of Japan Haruhiko Kuroda hastened to calm investors today, saying that the Japanese central bank will continue a large-scale mitigation program, as inflation is still far from the target level of 2%. "It's too early to discuss the timing and methods of getting out of soft politics. We will continue to buy ETF, REIT at the current pace", Kuroda added. This, in practice, is already traditional in recent months, the statement of the head of the Bank of Japan on "readiness for the most decisive measures to support the Japanese economy". In December, Kuroda also said that "the leadership of the Bank of Japan will further support the cycle of revenue growth, supporting a moderate increase in wages and prices".

The board member of the Bank of Japan Hitoshi Suzuki supported Kuroda today, noting that "the conditions necessary to further accelerate the rate of price growth" are created, thanks to a strong labor market, as well as government efforts to raise wages and increase productivity.

Meanwhile, sales in the market of long-term state bonds continued, and the yield of 10-year Japanese bonds rose by 1 point to 0.08%. The yield of 10-year US bonds is also today near the maximum of 2.825%, reached at the beginning of this week (2.858%), the maximum level for the last four years. Investors remain cautious after the strongest fluctuations in recent days in international financial markets. The CBOE volatility index is at the beginning of today's European session near the mark of 27.75, after it jumped on Tuesday to a value of 50.00, which is several times higher than the usual range near the marks of 10.00 and 19.00.

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Support levels: 21720.00, 21490.00, 21140.00, 20950.00

Resistance levels: 21920.00, 22300.00, 23020.00, 23400.00, 24200.00


Trading Scenarios

Sell Stop 21600.00. Stop-Loss 22020.00. Objectives 21490.00, 21140.00, 20950.00

Buy Stop 22020.00. Stop-Loss 21600.00. Objectives 22300.00, 23020.00, 23400.00, 24200.00

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