Insights 
VT 
Key Points
- Nikkei 225 surged past 54,000 for the first time, hitting a fresh record high.
- Yen depreciation and expectations of fiscal stimulus continue to support equities.
Japan’s Nikkei 225 rose to a record high on Wednesday, extending a powerful rally that has gathered pace since the start of the year. The index climbed 1.3% to 54,219.24 in early trade, briefly pushing above the 54,000 level for the first time on record.
The move followed a sharp 3% jump in the previous session, triggered by reports that Prime Minister Sanae Takaichi may dissolve parliament as early as this month and call a general election in February.
Markets interpreted the possibility as a signal that further fiscal stimulus could be deployed to shore up growth.
Weak Yen Amplifies Exporter Gains
A renewed slide in the yen added a second tailwind for Japanese equities. The currency weakened sharply at the end of last week, lifting the value of overseas earnings for export-heavy firms and improving profit outlooks.
USDJPY slipped to its weakest level since July 2024 on Tuesday and was last trading near 159.2 per dollar. The softer currency has continued to support sectors with strong foreign revenue exposure, particularly technology and industrial exporters.
Policy and Politics Drive Sentiment
Market participants continue to focus on the political backdrop. Expectations of an early election have reinforced the view that the government may lean toward expansionary fiscal policy in the months ahead, which typically favours equities.
At the same time, the weaker yen has eased concerns around margin pressure for exporters, even as questions remain around the future pace of monetary tightening by the Bank of Japan.
Technical Analysis
The Nikkei 225 continues its bullish run into 2026, notching fresh highs near the 54,400 mark. The price remains well above the 5, 10, and 30-day moving averages, which are stacked in bullish order and rising steadily—reinforcing strong upside momentum.
The recent breakout follows a months-long consolidation phase between 47,000 and 52,000, with price now clearly above that prior resistance zone.
MACD has crossed above the signal line with widening divergence, and the histogram is expanding positively—indicating a strong bullish continuation.
Momentum remains firmly in favour of the bulls, with little immediate resistance overhead. Short-term support lies near 52,000, but traders will be watching closely to see if the index can establish a new base above 54,000.
Cautious Outlook After Sharp Gains
While momentum remains strong, investors may turn more selective after the rapid advance. Political headlines and currency moves are likely to continue driving short-term volatility.
If the yen remains weak and election speculation persists, Japanese equities may stay supported.
However, traders will watch closely for signs of profit-taking or shifts in policy expectations that could temper the rally in the near term.
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