The weakness in the JPY has been really quite pronounced over the last few weeks. While investors are expecting many central banks to raise interest rates to deal with rising inflation the Bank of Japan is still expected to keep interest rates very low. This has resulted in significant yen weakness. When the Yen is weak this makes Japan’s exports more competitive and often helps lift the Nikkei 225 higher. Check out the strong seasonals below for the Nikkei.

Over the last 10 years, the Nikkei has gained 9 times between November 03 and December 30. The average gain has been +4.23%. The largest gain was +11.56% in 2020 and the largest loss was -4.17% in 2011. There is never any guarantee that this seasonal pattern will repeat again this year. However, it is very helpful to notice when these strong seasonal patterns are in place.

Major Trade Risks: The main risk to this seasonal pattern would be if the Bank of Japan decides to raise interest rates or some strong risk-off trading enters the market.