The widening of the increase in response to external factors such as the weakening yen and the rise in chinese stocks

This week's Nikkei average closed significantly higher at 39,829.56 yen, up 2105.65 yen (+5.58%) for the week. With the U.S. market hitting record highs including the NY Dow, U.S. stocks continued to rise. Due to factors such as the widening of the yield spread between Japan and the U.S., resulting in a weaker yen, large cap Japanese stocks were bought, and the Nikkei average recovered the 39,000 yen level since July 31st based on closing prices. With Bank of Japan Governor Kuroda's clear position of not rushing for additional rate hikes, the yield on the benchmark 10-year government bond in Japan dropped to the 0.7% range since August 5th. Background factors include the slightly widened yield spread between 10-year government bonds in Japan and the U.S., resulting in a broad depreciation of the yen against major currencies. Furthermore, China announced significant monetary easing leading to a sharp increase in Chinese stocks. Stocks of companies with business in China such as Shiseido Company,Limited Sponsored ADR <4911>, Fanuc Corp <6954>, and Yaskawa Electric <6506> also rose. Expectations rose regarding the Liberal Democratic Party's leadership election over the weekend, leading to a further rise in the afternoon and nearing the 40,000 yen level for the second consecutive time.

According to the investment trends of foreign investors in the third week of September, foreign investors sold 545.5 billion yen worth of equities, as well as 60.8 billion yen worth of TOPIX futures, and 223.5 billion yen worth of 225 futures, resulting in a total net selling of 829.8 billion yen. On the other hand, individual investors sold 291.6 billion yen in total including 320.4 billion yen of equities. Companies themselves significantly bought 1.1895 trillion yen worth of equities.

The Nikkei 225 night session experienced a sudden decline of 2,410 yen compared to the regular closing price.

The Nikkei average showed a strong movement closing at a high for the second consecutive day, breaking above the 75-day moving average (75MA: 38,293 yen) level for the first time in about two months. However, after the closing on the 27th, around 3:20pm, news of Fumio Kishida becoming the 28th President of the Liberal Democratic Party led to a drop in the USD/JPY exchange rate to the 142 yen level. In the night session of the Osaka Exchange, Nikkei 225 futures closed at 37,440 yen, 2,410 yen lower than the daytime closing price.

On the 27th, the U.S. stock market was mixed, with the Dow Jones up 137.89 points (+0.33%) to 42,313.00, the Nasdaq down 70.70 points (-0.39%) to 18,119.59, and the S&P 500 down 7.20 points (-0.13%) to 5,738.17 at the close of trading.

The Nikkei average at the beginning of the week is likely to reverse the upward movement of around 2,000 yen seen on the 26th and 27th. It was anticipated that Takamichi Hayashi's negative stance towards additional rate hikes in the forex, stock, and bond markets led to a "Hayashi trade", with a widespread weak yen in the forex market, rising stocks (except for financial stocks), and a trend of falling yields in the bond market. With Hayashi's defeat and Fumio Kishida becoming the new President of the Liberal Democratic Party, there is a high likelihood of a reversal of the "Hayashi trade".

There is a growing desire to assess the policy content of the Ishiba administration

Next week, important events such as US employment statistics will be key, but the attention will still be on party personnel matters and government structure plans by Mr. Ishiba. During the leadership election, Mr. Ishiba proposed the establishment of a 'Disaster Prevention Agency' by the middle of fiscal 2026, as well as promoting regional revitalization and advocating for a system to encourage corporate expansion into regions to correct the excessive concentration in Tokyo. This could lead to a focus on disaster-related stocks and regional revitalization-related stocks as certain sectors have not been widely explored, there is a wide range of interest from small to large cap stocks.

On the other hand, the market is wary of the strengthening of corporate tax and financial income taxation for certain companies. While the new NISA (Nippon Individual Savings Account) and iDeCo (Individual-type Defined Contribution Pension Plan) maintain their current policy direction, it is anticipated that the overall framework of the Kishida administration's 'asset management sovereign nation' will not change, but there is significant market sensitivity to the strengthening of financial income taxation. The sharp drop in the 225 Futures' Night Session is believed to reflect these concerns. It will be necessary to carefully determine the policies that the Ishiba administration will introduce in the future. Buying interest from individual investors is likely to be directed towards related stocks, but inflow of stable investment funds from overseas investors may be temporarily withheld.

■ Weekend: US Employment Statistics Released

Next week domestically, on September 30, data on August retail sales, department store/supermarket sales, industrial production (flash report), number of housing starts, on October 1, data on August employment statistics, BOJ's Tankan Survey for the 3rd quarter, and on the 2nd, data on September monetary base, consumer attitude index are scheduled.

Overseas, on September 30, data on Manufacturing PMI, Services PMI, Caixin Services PMI, Caixin Composite PMI in China, August retail sales in Germany, GDP for Q2 in UK (final value), current account, Nationwide House Price Index for September, consumer credit for August, Money Supply, CPI for September (preliminary) in Germany, PMI in Chicago, USA, on October 1, retail sales for August in Australia, Manufacturing PMI in Turkey, Consumer Price Index for September (preliminary) in EU, Manufacturing PMI, JOLTS Job Openings for August in USA, ISM Manufacturing PMI for September, then on the 2nd, employment statistics for August in EU, ADP Employment Change for September in USA, weekly crude oil inventories, on the 3rd, trade balance for August in Australia, weekly initial jobless claims in USA, Composite PMI for September (final value), Services PMI, new orders for August, durable goods orders (final value) in USA, ISM Non-Manufacturing PMI for September, and on the 4th, employment statistics for September in USA are scheduled.