Snapshot: The Nikkei 225 edged up 0.28% to close at 71,250, securing an impressive 8% gain for the week as domestic inflation printed in line with expectations. May core CPI held steady at 1.4%, reinforcing the Bank of Japan’s gradual normalization path as outlined in yesterday’s April minutes and Deputy Governor Himino’s parliamentary address. This domestic stability has successfully offset hawkish undercurrents from US bond markets.
- The 71,000 level has established itself as firm structural support, bolstered by a BoJ that remains highly sensitive to growth risks and is in no rush to aggressively tighten policy.
- US 08:30 ET data looms large; a hot print would fuel the run in US 2-year yields (currently at 4.2%) and could trigger cross-asset risk-off flows, testing the Nikkei’s resilience given the VIX is hovering at 18.44.
Bias into NY: We maintain a constructive bias targeting 72,000, as steady 1.4% inflation and a patient BoJ insulate Japanese equities from the global rate pressure seen in US 10-year yields.