TOKYO - Tokyo stocks surged at the start of the week, with the Nikkei Stock Average closing above 72,000 for the first time and extending its record-setting streak to a sixth consecutive trading day.
Buy orders spread across the Tokyo market from the morning, pushing the Nikkei above 72,000 for the first time and setting a new intraday high. Investor sentiment was lifted by progress toward a final agreement after the first talks in Switzerland since the United States and Iran signed a memorandum aimed at ending their fighting, while expectations for the Japanese government's growth strategy fueled further buying in AI and semiconductor-related shares that have already been driving the market higher.
The Nikkei ended at 72,353, up 1,103 yen from the end of last week, marking a new record closing high and the sixth straight trading day of record finishes. Still, one market participant said, "There is growing caution over overheating after the recent rapid rise."
Market attention has been shifting away from Middle East tensions and toward the outlook for the U.S. economy, according to Jotaro Morimoto, senior analyst in the Financial Market Research Department at Sony Financial Group. Morimoto said the U.S. and Iran had basically reached an agreement and that the Strait of Hormuz was expected to reopen in stages, but he cautioned that the key issue is whether traffic and logistics through the strait return fully to pre-conflict conditions. Because details of the agreement remain unclear, he said some uncertainty is likely to persist and normalization may take more time.
Morimoto said the U.S. economy is slowing but does not appear to be on the brink of recession. Real gross domestic product grew 1.6% in the January-March quarter, a relatively weak reading, but domestic private final demand, which gives a broader picture of underlying economic momentum, remained fairly firm. U.S. employment also continued to support the economy, with the number of workers rising by 172,000 in May from the previous month and the unemployment rate staying at 4.3%, a low level by historical standards. Compared with last year, the economy has weakened somewhat, but employment and income remain supportive, he said.
On inflation, Morimoto said the U.S. consumer price index rose 4.2% in May from a year earlier, mainly due to higher energy prices linked to Middle East tensions. Core inflation, excluding food and energy, stood at 2.9%, showing some signs of edging higher but not indicating a broad-based price increase across many categories. If the Strait of Hormuz reopens and crude oil prices stabilize, headline inflation is expected to gradually moderate from the summer. However, he said markets should not become complacent even if the headline index declines, because higher transportation and services costs can be slow to fall once they have risen, making trends in core prices and wages important to watch.
Morimoto said that if the Strait of Hormuz normalizes, the Federal Reserve is unlikely to need to raise interest rates this year. The key issue is whether the recent rise in crude oil prices feeds into inflation expectations and wages, creating secondary effects that accelerate inflation. He said a June University of Michigan survey showed long-term inflation expectations at 3.4%, below market forecasts and slightly lower than the previous month, suggesting that the risk of such secondary effects is not particularly high for now. As a result, he said the next U.S. rate increase is likely to come next year or later.
On the dollar-yen exchange rate, Morimoto said the yen could strengthen in the short term as speculative positions unwind. He pointed to Chicago IMM data showing that speculative yen-selling positions are extremely large, even heavier on a gross basis than at their 2024 peak. Any trigger, including possible foreign-exchange intervention, could prompt a rapid reversal similar to the moves seen in 2024, creating the possibility of a sharp but temporary drop in dollar-yen.
With dollar-yen currently around 160 yen, Morimoto said a decline below 150 yen and then toward 140 yen or 130 yen is less likely than a temporary correction driven by position adjustment. From a medium-term perspective, he said the dollar is likely to be bought on dips, especially if the U.S. economy remains strong, and the exchange rate may gradually return to a stronger dollar trend.
Source: 日経CNBC 公式チャンネル
