Insights 
VT 
Key points
- The Nikkei 225 closed at 39,775, down 0.11%, while the broader Topix Index inched up 0.06% to 2,836
- Political continuity under PM Shigeru Ishiba calms investor nerves as Japan enters delicate tariff talks with the US
The Nikkei 225 ended Tuesday’s session marginally lower, down 0.11% to 39,775, despite a brief spike to 40,263.65 before midday. The broader Topix Index rose 0.06% to 2,836. Both indices reflect a Japanese market in wait-and-see mode after the weekend’s upper house elections.
The ruling coalition’s loss of its majority, while already priced in by markets, briefly dented momentum. Traders held back from fresh positioning until confirmation that Prime Minister Shigeru Ishiba would stay in power.
That confirmation came swiftly—alongside Ishiba’s statement that he would lead Japan through upcoming tariff negotiations with the United States.
Investors took solace in that continuity. The risk of political vacuum—a concern that could have spooked foreign inflows—appears to have been averted. For now.
Technical Analysis
On the technical front, the Nikkei surged to a session high of 40,263.65 before retreating sharply to a low of 39,578.65. Price action traced a steep drop during the second half of the trading day before stabilising near the 39,800 level. It closed at 39,816.65, slightly off the day’s open of 39,778.15.
Picture: The Nikkei 225 just pulled off a textbook rebound, as seen on the VT Markets app
The MACD indicator shows the beginning of a bullish crossover, but momentum remains weak. Traders may treat this as an early signal, not a confirmation.
Meanwhile, the 15-minute MA (5,10,30) hints at a near-term recovery after the post-lunch drop, though resistance remains around the 40,000 level.
The candlestick pattern at the end of the session suggests indecision.
If the MACD histogram continues to print higher bars and price holds above the 39,700 support, a push back toward 40,000 remains possible—but momentum will likely be tentative.
Cautious Forecast
While the immediate political fallout has been contained, upside in the Nikkei will hinge on how Japan handles upcoming US tariff negotiations.
Any misstep could weigh heavily on exports and broader equity sentiment. Traders should also monitor the yen for signs of strength, which could apply downside pressure on large-cap exporters.
Volatility may remain compressed until key macro signals emerge.
For now, dips toward 39,600–39,500 may attract buyers, while rallies above 40,200 could meet resistance unless fresh catalysts surface. The cautious bull remains in play—but only just.
