Key Points
- Nikkei225 closed at 44,794.65, down 279 points (0.62%) after hitting 45,053 intraday.
- Japan’s August factory output fell more than expected, highlighting fragile domestic momentum.
Japan’s Nikkei225 index eased 0.62% on Tuesday, finishing at 44,794.65 after briefly touching 45,053. The retreat followed a strong run that saw the benchmark notch repeated record highs through September, supported by global risk appetite and expectations of deeper U.S. monetary easing.
The pullback coincided with fresh concerns over the U.S. fiscal outlook. Budget talks between President Trump and Democrats stalled, fuelling warnings from Vice President JD Vance that the government is “headed to a shutdown.”
A closure would halt the release of September’s non-farm payrolls, leaving traders reliant on less comprehensive indicators such as the JOLTS job openings report. Analysts expect openings to hold around 7.18 million in August.
Domestic Pressure Points
Japanese data compounded the weaker tone, with factory output in August falling more sharply than anticipated. While exports have been resilient, domestic industrial activity is losing momentum amid a softening Chinese economy and higher input costs.
The yen, meanwhile, traded near 148.46 per dollar, offering limited relief to exporters.
Market watchers suggest the Bank of Japan may face renewed pressure to justify its cautious stance, particularly after two board members dissented at the last policy meeting in favour of rate hikes. The next BoJ meeting on 30 October now looms larger, especially if shutdown delays leave the Federal Reserve with reduced data visibility.
Technical Analysis
The Nikkei 225 slipped to 44,794.65, down 0.62% on the session, giving back some of the sharp gains seen in September. This pullback comes after the index tested highs near 45,695, suggesting profit-taking may be setting in as the market digests its rapid climb.
Despite today’s decline, the overall trend remains bullish. The price is still well above the 30-day moving average, with the 5- and 10-day MAs supporting the rally from below.
This shows that the uptrend structure is intact, and today’s drop is more of a cooling-off than a reversal. The longer-term support zone remains near 42,700, while immediate support is seen around 44,500.
Momentum signals are softening. The MACD is still above the zero line, showing bullish momentum, but the histogram is narrowing and the MACD line is converging toward the signal line. This suggests upside momentum may be slowing, leaving the index vulnerable to a deeper correction if profit-taking accelerates.
Cautious Forecast
The Nikkei’s recent surge has priced in aggressive Fed easing and resilient global liquidity. However, weaker domestic output and the risk of a U.S. shutdown delaying jobs data could temper momentum. As long as the index holds above 44,700, the broader uptrend remains intact, though traders may look for pullbacks toward 43,500 if global risk appetite fades.
