Japan's benchmark Nikkei 225 index climbed to its highest level since August 18 on Tuesday, reaching 68,567, as a combination of favorable macro data, easing crude oil prices, and strong earnings from U.S. memory chip maker Micron Technology lifted investor sentiment. The index has now recovered 9.7% from its September low of 62,625.
Macro data and BOJ minutes support risk appetite
Investors digested a batch of Japanese economic releases that, while mixed, did not derail the rally. The Bank of Japan's Tankan survey showed that capital expenditure by large firms rose 11.3% in the third quarter, slightly below the 12.3% expected. Meanwhile, the manufacturing PMI eased to 54.1 from 54.9 in the prior month, indicating a modest slowdown in factory activity.
The BOJ also released minutes from its last policy meeting, where officials decided to raise interest rates by 25 basis points. The minutes offered no surprises, and market participants largely shrugged off the tightening, focusing instead on the broader growth outlook.
Oil price retreat provides tailwind
Crude oil prices pulled back from recent highs, with Brent dropping to $97 per barrel and West Texas Intermediate (WTI) sliding to $89.57. The decline came as traffic through the Strait of Hormuz, a critical chokepoint for global oil shipments, continued to increase. For Japan, which imports nearly all of its oil, lower energy costs are a positive for corporate margins and consumer spending.
Before the recent U.S.-Iran tensions, Japan sourced most of its crude from Middle Eastern suppliers such as Saudi Arabia and the UAE. The stabilization in oil prices reduces the risk of an energy-driven inflation spike, supporting the case for equities.
Micron earnings ignite AI rally
The standout catalyst was Micron Technology's quarterly report, which showed revenue surging to $54.3 billion in the fourth quarter, well above the $50 billion analysts had projected. The growth was driven by robust demand from data centers amid the ongoing artificial intelligence boom. Hendi Susanto, an analyst at Gabelli Funds, noted that he has not seen any negative data points suggesting the memory cycle is about to reverse.
That optimism spilled over into Japanese tech stocks. SoftBank Group jumped 3.5%, while chip-related names such as Kioxia Holdings, Tokyo Electron, and Advantest advanced 4.45%, 4.75%, and 7.50%, respectively. Murata Manufacturing also climbed more than 6%. The rally extended to South Korea, where Samsung Electronics and SK Hynix each rose over 5%.
Technical outlook points higher
From a technical perspective, the Nikkei 225 has broken above a descending trendline that had connected the highs since late June. The index also trades above its 50-day exponential moving average, and the MACD indicator has turned positive, with both lines above the zero level. Analysts see the next resistance at 72,842, the June high, with a move above that potentially opening the door to 73,000.
While the immediate momentum is bullish, investors remain mindful of potential headwinds, including the BOJ's rate hike path and geopolitical risks. However, for now, the confluence of supportive macro data, easing oil prices, and strong corporate earnings has created a favorable environment for Japanese equities.
This article is for informational purposes only and does not constitute financial advice.
