USDJPY Fundamental Analysis | 03/23/23On Thursday, the Japanese stock market experienced a decline as the Nikkei 225 Index fell by 0.17% to close at 27,420 points, and the broader Topix Index dropped by 0.29% to 1,957 points. This reversal was due to Wall Street's negative trend, following the Federal Reserve's decision to raise interest rates by 25 basis points. The Fed Chair Jerome Powell indicated that there will not be any rate cuts this year, and if needed, rates may rise higher than expected. This decision affected financial stocks as Treasury Secretary Janet Yellen informed lawmakers that the US government was not planning to provide a "blanket insurance" for bank deposits. Moreover, Japanese manufacturers remained pessimistic for the third consecutive month in March due to concerns about slowing global growth, which could affect the country's export-heavy industries. As a result, financial, healthcare, and technology stocks experienced losses, with Mitsubishi UFJ (-1.4%), Takeda Pharmaceutical (-2.6%), and Keyence (-1.6%) being among the hardest hit. The Japanese yen strengthened to 131 per dollar, the highest in 5 weeks following the US Federal Reserve's rate hike decision. During the press conference, Fed Chair Powell explained that the pause in hiking rates was to address the banking crises. On the domestic front, the Bank of Japan's minutes from its January meeting indicated that members reiterated the need to maintain ultra-easy policies to achieve the 2% inflation target in a sustainable and stable manner. In this regard, the BOJ left its policy of ultra-low interest rates unchanged this month at Governor Haruhiko Kuroda's final policy meeting before his retirement. Looking ahead, Trading Economics global macro models and analysts expect the Japanese Stock Market Index to trade at 27,279.95 points by the end of this quarter and 24,842.68 in 12 months time. Additionally, the Japanese Yen is expected to trade at 137.83 by the end of this quarter and 146.74 in 12 months time.
