The weakness in the JPY on the BoJ’s policy stance is also good for the Nikkei. JPY weakness is a key market theme right now. The BoJ kept up their ultra-easy monetary policy stance at the last BoJ meeting. They were unfazed by yen weakness and seemed happy for it to continue. The BoJ also kept up their commitment to keep the Japanese 10-year bond yield at 0%. A weak JPY boosts the attractiveness of Japanese exports as they are better value to foreign purchasers. This means that the Nikkei often has periods of strength alongside a weak JPY. On top of all this hawkish Fed talk this week has led to a surge in US yields which also weakens the JPY.

Over the last 55 years, the Nikkei has risen 38 times with an average return of 1.62% between March 25 and May 01. Does this mean that the Nikkei could be worth buying ahead of this seasonal pattern? Or has the recent weakness in the JPY been overdone now and is a correction due?

Major Trade Risks: If the BoJ change their policy stance that could strengthen the JPY and that would likely result in a falling Nikkei.