Tokyo Market Summary: Nikkei Average 329 yen, long-term interest rate rose to 1%, reaching the upper limit below the Bank of Japan YCC since 2013/5

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Market Overview
Today's Nikkei Stock Average ended at 38617.10 yen, 329.83 yen lower than the previous business day, and the Tokyo Stock Price Index (TOPIX) ended at 2737.36, 22.36 points lower than the previous business day.

Top news
Market trends ahead of NVIDIA's financial results
・Market movements ahead of NVIDIA's financial results announcement: Semiconductor-related stocks such as Tokyo Electron were sold in response to the decline in the US Philadelphia Semiconductor Stock Index (SOX). The focus of the market is NVIDIA's financial results announcement ahead of the 22nd US time, and it can be seen that buying into semiconductor-related stocks comes to a standstill ahead of this.
・Stock market trends: Real estate stocks and semiconductor-related stocks were sold in response to rising interest rates. In particular, real estate stocks were affected by rising interest rates and a decline in sales of newly built condominiums in the Tokyo metropolitan area in April. The Nikkei Stock Average fell by more than 300 yen at one point.
・The decline in trading company stocks: Trading company stocks have slowly continued to decline, and “trading companies” have declined on the Nikkei average by industry, such as Mitsubishi Corporation and Sumitomo Corporation temporarily falling 2%. In particular, the impact was that Mitsubishi Corporation's net profit forecast for the fiscal year ending 2025/3 fell below market expectations.
・Trends in yen exchange rates: The yen exchange rate is weak in the first half of the $1 = 156 yen range. Since the US financial authorities continue to be cautious about interest rate cuts, the dollar is supported. On the other hand, interest rates on yen have also risen, so it is not an environment where the appreciation of the dollar and the depreciation of the yen progresses significantly. (Ishikawa Junichi Senior Market Analyst at IG Securities)

Long-term interest rates reach 1% for the first time since 2013/5
・Trends in long-term interest rates: In the domestic bond market on the 22nd, the yield on new 10-year government bonds temporarily recorded 1%, and this is the first time in about 11 years since 2013/5. Long-term interest rates had been kept in the zero% range or in the negative zone for a long time due to the Bank of Japan's cross-dimensional easing, but they finally reached 1%. This is influenced by speculation that the Bank of Japan will soon reduce government bond purchases.
・The impact of the US Federal Reserve (Fed): Since Director Waller of the Federal Reserve expressed the view that additional interest rate hikes were not necessary, US interest rates declined on the 21st, and this led to purchases of domestic bonds.
・Trends in ultra-long-term bonds: In Japan, there was a movement where ultra-long-term bonds were sold, such as the yield on new 30-year government bonds being 2.105%, which is 0.020% higher than the previous day, and the yield on new 20-year bonds temporarily rising to 1.800%.

2024 Earnings Forecast: Conservative Plans and Their Impact on the Stock Market (Mr. Kitaoka Nomura)
・Maintainability of the fiscal year 24 earnings forecast: The corporate earnings forecast for 2024 (current fiscal year) was more conservative than expected, and the result was that there were few positive surprises for the stock market. In particular, the impact was that there were many export companies that set exchange assumptions in the direction of yen appreciation.
・Disparity between earnings forecasts and market consensus: The divergence rate between corporate earnings forecasts and market consensus is large compared to previous years, with sales minus 0.3%, ordinary profit negative 7.5%, and net profit negative 8.7%. For this reason, corporate earnings forecasts are cautious.
・The timing of the upward correction: Upward revisions to corporate earnings forecasts are expected to increase after the announcement of mid-term financial results from October to November. In particular, the results of spring labor-management negotiations (spring battles) are expected to have a positive impact on consumption.
・Shareholder returns and the impact of Japanese stocks: There are many announcements of share buybacks, and this is a supporting factor in terms of supply and demand for Japanese stocks. In response to an upward revision of earnings forecasts after fall, it is expected that TOPIX may reach 2900 and the Nikkei Average again at 40,000 yen by the end of the year.