The Japanese stock market registered modest gains on Monday, extending the sharp rally from the previous session, as the Nikkei 225 index climbed to just below the 27,000 mark. This upward movement occurred despite persistent concerns over a significant spike in domestic coronavirus cases and a backdrop of mixed economic indicators.
Market Performance Overview
The benchmark Nikkei 225 Index closed up 245.909 points, or 0.92 percent, settling at 26,963.24. Throughout the trading day, the index touched an intraday high of 26,967.44 and a low of 26,541.65. The positive momentum was largely influenced by broadly favorable cues from Wall Street’s strong performance on Friday, with technology stocks notably leading the charge in Tokyo.
Sectoral Dynamics and Key Movers
The technology sector showed particular strength, contributing significantly to the market’s overall ascent. Advantest gained almost 4 percent, Tokyo Electron added almost 2 percent, and Screen Holdings was up 1.5 percent. Market heavyweight SoftBank Group also saw a gain of almost 4 percent.
Among major exporters, Sony surged more than 3 percent, while Panasonic and Canon each edged up 0.5 percent. Conversely, Mitsubishi Electric recorded a loss of almost 2 percent. Automakers presented a mixed picture, with Toyota edging up 0.5 percent, while Honda declined by almost 1 percent.
In the banking sector, Sumitomo Mitsui Financial experienced a loss of more than 2 percent, and both Mizuho Financial and Mitsubishi UFJ Financial were down 1.5 percent each.
Beyond these sectors, several companies posted significant gains. Alps Alpine soared almost 18 percent, Z Holdings surged 5.5 percent, and Olympus and Recruit Holdings each added 4.5 percent. Japan Steel Works and M3 also gained more than 4 percent each, while TDK, Japan Exchange Group, and Minebea Mitsumi each added almost 4 percent.
Conversely, some companies faced notable declines. Chubu Electric Power plunged more than 9 percent, Omron lost almost 8 percent, Tokyo Electric Power slipped more than 6 percent, and Seiko Epson was down more than 4 percent. Uniqlo operator Fast Retailing also recorded a loss of almost 1 percent.
Economic Data Insights
New data released by the Ministry of Economy, Trade and Industry on Monday revealed a nuanced economic picture for Japan.
Retail Sales Report
- Retail sales in December increased by 1.4 percent year-on-year, reaching 14.656 trillion yen.
- This figure fell short of expectations for a 2.7 percent increase and marked a deceleration from the 1.9 percent rise recorded in November.
- On a seasonally adjusted monthly basis, retail sales declined by 1.0 percent, following an upwardly revised 1.3 percent increase in November (originally 1.2 percent).
- For the fourth quarter of 2021, retail sales were up 1.4 percent on year and 2.0 percent on quarter.
- For the entirety of 2021, retail sales were up 1.9 percent.
Industrial Output Figures
- Industrial output in December also showed a year-on-year increase of 2.7 percent, according to the Ministry.
- This was slightly below the anticipated 3 percent rise and a decrease from the 5.1 percent growth seen in November.
- Seasonally adjusted, monthly industrial production sank 1.0 percent, missing forecasts for a more modest 0.8 percent drop, and contrasting sharply with the 7.0 percent spike observed in the preceding month.
Persistent Health Concerns
Traders remained vigilant regarding the escalating domestic coronavirus situation. Japan reported over 70,000 daily new cases for the fourth consecutive day, marking record highs for nearly two weeks. A majority of Japan’s 47 prefectures are currently under a quasi-state of emergency, with Tokyo anticipated to transition into a full virus state of emergency in the near future, signaling potential further economic restrictions.
Global Market Context and Commodities
The positive sentiment in Tokyo was partly a spillover from Wall Street, where stocks staged a significant turnaround on Friday. The tech-heavy Nasdaq led the rally, spiking 417.79 points, or 3.1 percent, to close at 13,770.57. The S&P 500 surged 105.34 points, or 2.4 percent, to 4,431.85, and the Dow Jones Industrial Average jumped 564.69 points, or 1.7 percent, to 34,725.47.
In contrast, major European markets all moved to the downside on the same day. The French CAC 40 Index slid by 0.8 percent, while the U.K.’s FTSE 100 Index and the German DAX Index tumbled by 1.2 percent and 1.3 percent, respectively.
In the commodities market, crude oil prices settled modestly higher on Friday. West Texas Intermediate Crude oil futures for March ended higher by $0.21, or about 0.2 percent, at $88.82 a barrel. WTI futures, which rose to their highest level in over seven years, gained approximately 2 percent for the week, driven by concerns of tight supplies and rising geopolitical tensions. In the currency market, the U.S. dollar was trading in the lower 115 yen-range on Monday.
The Japanese market’s modest ascent on Monday, bolstered by tech sector strength and positive cues from the U.S., illustrates a degree of resilience. However, this upward movement is tempered by ongoing concerns surrounding the domestic health crisis and economic data that, while positive year-on-year, fell short of more optimistic projections, suggesting a cautious outlook persists among investors.
