Nikkei 225 forecast as Fast Retailing and Recruit stocks plunge

Japan stocks have moved sideways in the past few weeks as concerns about the global economy remain. The closely-watched Nikkei 225 (NI225) index was trading at ¥27,412, which was a few points below the year-to-date high of ¥27,847. It remains a few points above this year’s low of ¥25,475. 

Fast Retailing stock plunges

The Nikkei index has pulled back in the past few weeks as investors react to several important news. Earlier this month, Japan’s Prime Minister announced the next Bank of Japan (BoJ) governor. Kazuo Ueda, a well-respected economist will replace Haruhiko Kuroda in April.

It is still unclear whether Ueda will radically change the country’s monetary policy. However, some analysts believe that he could shift some of the bank’s policies considering that inflation remains at an elevated level. 

A change in policy could involve moving from the yield curve control that has brought the cost of government borrowing sharply lower. It could also involve hinting that high-interest rates are coming. This is an important shift considering that Japan has gotten accustomed to negative rates for years.

Meanwhile, many well-known Nikkei 225 constituent companies are deeply in the red this year. Fast Retailing, the parent of Uniqlo, has plunged by 66% in 2023 alone. It has fallen by more than 56% in the past 12 months, making it one of the top underperformers. The company has been hit by supply chain issues and inflationary challenges. Other well-known similar firms like Shein, Boohoo, and Asos have also plunged.

Recruit Holdings, the parent company of Indeed, Glassdoor, and Chandler Macleod, has crashed by 12.57% in 2023. Shiseido and Softbank shares have also declined by more than 10%.

Many companies in the index have bounced back. Kobe Steel shares have jumped by 43% while Citizen Holdings, Nissan, Yokohama Rubber, and Mitsubishi have risen.

Nikkei 225 forecast

Nikkei chart by TradingView

The daily chart shows that the Nikkei index has moved sideways in the past few days. It has formed a symmetrical triangle pattern that is shown in black. The current price is a few points below the upper side of this triangle. It is also being supported by the 50-day exponential moving average (EMA). The index has also moved slightly below the important resistance point at ¥28,000.

Therefore, with the overall mood in the market changing, we could see the Nikkei 225 index retreat and retest the lower side of the triangle at ¥26,000.