Futures for Japan's Nikkei index (JAP225) are trading near a 4% sell-off today due in large part to the expected further strengthening of the Japanese yen, which will put pressure on the profits and margins of Japanese exporters, who have so far benefited from the weakening Japanese currency. The USDJPY exchange rate is currently stabilizing around 150.

  • The declines accelerated today, following a set of weaker macro data from the U.S. (higher claims, weak manufacturing ISM) that put a question mark over the real health of the U.S. economy and pushed the yield on 10-year treasuries below 4%.
  • Until recently, Japanese stocks traded at an additional, often sizable, premium due to the FX situation. Now, however, with macro data from the U.S. increasingly pointing to a weakening economy, while Japan is seeing slow growth, with a potentially fundamental change in BoJ policy - that premium may evaporate as a stronger yen will limit exporters' yields.
  • So we can expect the FX premium in valuations of Japanese companies such as Toyota, and Advantest to be limited. Also, the more than 1.8% sell-off in the Nasdaq 100 (US100) after yesterday's gains puts a question mark over sentiment around Japanese companies. 

JAP225 (D1 interval)

Contracts are testing the May-February 2024 levels, giving back nearly 4% today and deepening the correction to more than 10% from the June local highs. 
Source: xStation5