- Summary:
- The Nikkei 225 index rallied today after Reuters reported of a new $1.1 trillion stimulus package set to be unveiled by the Japanese government
Japan stocks rose today as investors reacted to the new stimulus package proposed by Shinzo Abe. The Nikkei 225 pared earlier losses and rose by more than 0.65%, with most companies in the index being in the green.
Japan stocks react to new stimulus
Japan has reacted strongly to the coronavirus pandemic. The country’s central bank has switched on the money printer and is churning trillions of yen through its open-ended quantitative easing program. As a result, the bank’s balance sheet is now bigger than Japan’s total GDP.
Meanwhile, the national government has been ratcheting its fiscal response. The government has unveiled fiscal stimulus worth more than $1.1 trillion. It is also creating a fund that will help small and medium-sized enterprises pay their rent for the next few months.
Now, the government is planning another stimulus package worth more than $1.1 trillion. This will bring the total stimulus offered to more than $2.2 trillion. Since Japan’s GDP is worth about $4.7 trillion, the new package will be worth almost 50% of GDP. This is a shocking figure considering that Japan has a debt to GDP ratio of more than 196%. That is a big number considering that the United States debt to GDP is about 106%.
Companies in the Nikkei 225 index have been affected significantly by the coronavirus pandemic. As we have reported before, firms like Toyota, Nissan, Mazda, and Honda have all slashed production of cars. Also, industrial and manufacturer production has slumped. The same is true with the retail sales.
Nikkei 225 best and worst performers
The best-performing stocks in the Nikkei 225 index today were DOWA holdings, Mitsui Engineering, Isuzu Motors, and Credit Saison. All these stocks rose by more than 7%. On the other hand, the worst-performers were Idemitsu Kosan, Tokyo Electron, Dainippon Screen, and West Japan Railway. These stocks fell by more than 2 per cent. The most active stocks in the Nikkei 225 were Mizuho Financial, Mitsubishi Financial, Nissan, and Softbank.
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Nikkei technical outlook
The Nikkei 225 index is trading at ¥21,432, which is the highest it has been since March 3. On the daily chart, the price is above the important resistance level at ¥21,165, which is the 61.8% Fibonacci retracement level. Additionally, it is above the 50-day and 100-day exponential moving averages while the momentum is elevated. That means that the price will continue rising as bulls now target the 78.6% retracement at ¥22,428.
On the flip side, a move below ¥20,238 will invalidate this trend. This price is along the 50% retracement and is slightly above the 50-day EMA.