Insights 
VT 
Key Points:
- Nikkei 225 closed at 40,625.15, down 0.05%, while the Topix rose 0.4% to 2,920.
- BOJ expected to hold rates on Thursday, but could raise inflation forecasts in its quarterly outlook.
Japanese equities ended the session mixed on Wednesday as traders positioned cautiously ahead of the Bank of Japan’s (BOJ) monetary policy decision. The Nikkei 225 dipped slightly, closing down 0.05% at 40,625.15, while the broader Topix Index advanced 0.4% to 2,920, supported by gains in banking and energy stocks.
The lack of conviction stems largely from uncertainty around Thursday’s BOJ rate decision. While the central bank is widely expected to keep interest rates steady, traders are watching for upward revisions in its inflation outlook.
Rising price pressures across food and services could tilt the BOJ closer to policy tightening later this year, though policymakers remain cautious about global trade fallout.
Adding to the tension, U.S. Commerce Secretary Howard Lutnick confirmed that the August 1 tariff deadline for countries without trade deals remains firm.
While a truce extension between the U.S. and China appears likely, no formal agreement has yet emerged. Japan, as a major exporter, remains exposed to ripple effects across global manufacturing supply chains.
Technical Analysis
The Nikkei 225 traded sideways after a sharp intraday spike toward 40,962.15 was swiftly retraced. Price action now hovers around the 5-, 10-, and 30-period moving averages, all of which have begun to flatten. This typically signals market indecision or the start of a consolidation phase.
The MACD histogram has remained subdued, alternating weakly between green and red bars, and the signal line has stayed close to the zero axis without a clear trend bias.
Picture: Nikkei 225 holds range as bulls and bears tug for direction, as seen on the VT Markets app
With Japan’s earnings season still in motion and the Bank of Japan maintaining its ultra-loose stance as expected, equity traders appear hesitant to commit to a direction.
The lack of a strong catalyst may keep the index pinned within the 40,550 to 40,950 band for now. A confirmed break above 41,000 could open the door for renewed bullish momentum, but a dip below 40,540 might shift sentiment to the downside.
Cautious Forecast
Should the BOJ offer a more hawkish tone or raise its inflation projections aggressively, the Nikkei could face downward pressure, particularly if the yen strengthens in response.
Technically, a break below the 40,560 support area could expose the index to a retreat toward 40,400. Conversely, sustained moves above 40,800 would require stronger conviction from broader market catalysts.
