Japan's Nikkei seen setting new peak amid global uncertainties

Reuters

Japan's Nikkei seen setting new peak amid global uncertainties

Nov 26, 2024 at 11:45 pm GMT

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cpurl://apps.cp./cms/?pageId=stock-index-poll poll data

By Brigid Riley

TOKYO, Nov 27 (Reuters) -Japan's Nikkei 225 stock average .N225 will brave near-term global uncertainties to reach a record high by end-2025, according to a Reuters poll.

A resilient Japanese economy and continued strength in the United States, the world's largest economy and Japan's top trading partner, were noted by several respondents as positive for the Nikkei's momentum.

The Nikkei level in mid-2025 will rise to 40,625, 4.8% above the index's close on Monday, the Nov. 15-26 Reuters poll of 18 analysts showed. Responses ranged from 35,775 to 43,400.

It will then climb further in the second half to end 2025 at 42,500. That would put the benchmark index just above its record intraday peak of 42,426.77 hit on July 11.

"The U.S. economy is strong, and we expect year-end shopping seasons will be a good tailwind for Japanese exporters," said Nomura's Tokyo-based chief equities strategist Yunosuke Ikeda.

Expectations of how supportive the domestic economywould be for Japanese equities varied among respondents, however.

T&D Asset Management Chief Strategist and Fund Manager Hiroshi Namioka, who expected the Nikkei to be 40,500 by mid-2025, said Japan's economy will likely not improve dramatically, limiting room for market growth.

"Concerns over U.S.-China tensions under the Trump administration will also weigh on stock prices," he said.

Some of the biggest uncertainties revolved around how U.S. President-elect Donald Trump's policies will shape up after he is inaugurated on Jan. 20 and how those policies will impact Japan.

A majority of respondents said the Nikkei is unlikely to see a correction of 10% or more early next year, but many highlighted risks posed by potential U.S. tariffs.

"As our base case, we don't expect a correction early next year," said Nozomi Moriya, Japan equity strategist at UBS Securities.

However, a correction in the first half of 2025 "could be likely" under certain conditions, such as if Trump fully implements tariff promises made during his campaign and some tit-for-tat trade restrictionswere to result, she said.

Trump on Monday pledged big tariffs on the United States' three largest trading partners - Canada, Mexico and China - detailing how he will implement campaign promises that could trigger trade wars.

Another snag would be if the U.S. were to slip into a recession, although that risk should lessen over time if the Federal Reserve delivers the amount of monetary easing markets have priced in, said Moriya.

Only eight respondents offered forecasts for mid-2026, but the median of those was 44,500 points.

The Nikkei has risen about 16% so far this year.

(Other stories from the Reuters Q4 global stock markets poll package)

Reporting by Brigid Riley; additional reporting by Noriyuki Hirata, Kevin Buckland, Junko Fujita, and Mayu Sakoda; Additional polling by Jaiganesh Mahesh and Rahul Trivedi; Editing by Lincoln Feast.

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