The Tokyo stock market reopens on August 12 after Japan's Mountain Day holiday, with the Nikkei Stock Average hovering just shy of the psychological 67,000 yen threshold. The key question is whether the index can absorb profit-taking pressure and break through this milestone after surging 1,363.51 yen over the previous 10 sessions to close at 66,970.22 yen on August 10. While the holiday-period decline in U.S. markets—where all three major indexes fell for two consecutive trading days—poses a headwind, the yen's depreciation to the 159 range against the dollar provides a tailwind for export-oriented stocks. Market participants also await the U.S. July CPI release, setting the stage for a session where yen-driven buying and profit-taking intersect.
After the Mountain Day national holiday, trading resumes on August 12 at the Tokyo Stock Exchange with the Nikkei Stock Average facing its biggest test: whether it can absorb profit-taking pressure and climb above the psychologically significant 67,000 yen level. Over the previous 10 sessions, the Nikkei surged 1,363.51 yen to close at 66,970.22 yen on August 10, leaving it less than 30 yen shy of the 67,000 mark. While momentum favors further gains, the soft performance of U.S. markets during Japan's holiday closure acts as a headwind, even as the yen's continued depreciation provides underlying support, particularly for export-related shares.
In U.S. trading on August 11, all three major indexes declined. The Dow Jones Industrial Average fell 184.13 points to 53,791.85, the Nasdaq Composite dropped 159.91 points to 26,445.45, and the S&P 500 shed 24.91 points to 7,728.20. This followed losses on August 10, when the Dow fell 60.95 points, the S&P 500 slipped 4.53 points, and the Nasdaq declined 85.25 points—marking two consecutive trading days of losses for U.S. benchmarks. While the declines were modest, all under 1%, the adjustment from elevated levels continues.
Several factors are weighing on U.S. markets. Rising crude oil prices, driven by heightened geopolitical risks surrounding the Strait of Hormuz, have added pressure. Additionally, investors adopted a cautious stance ahead of the U.S. July Consumer Price Index (CPI) release on August 12. Depending on the inflation data, the Federal Reserve's monetary policy trajectory could shift, prompting market participants to avoid taking aggressive positions.
A potential tailwind for the Tokyo market, however, is the foreign exchange environment. The dollar-yen pair traded around 159.27 yen in early morning trading on August 12, representing a depreciation of roughly 0.86 yen compared with the 158.40-yen level at the close of Tokyo trading on August 10. The dollar strengthened broadly against major currencies amid rising U.S. long-term interest rates, pushing the yen down to the 159 range. This yen weakness supports Japanese equities by boosting earnings expectations for export-oriented companies.
In today's Tokyo session, profit-taking is likely to emerge following the sharp rally on August 10. With the market reopening after a gain exceeding 1,300 yen and U.S. stocks extending their declines, selling pressure may dominate at the opening bell. However, the yen's depreciation to the 159 range is expected to provide a sense of security for buyers of export-related shares, potentially limiting downside moves.
Market participants view the 67,000 yen threshold as the first major hurdle. With the August 10 close leaving the index less than 30 yen away, the milestone is within striking distance. But even if the level is breached, the critical question is whether it can be sustained. A temporary push above 67,000 yen could quickly reverse if buying momentum falters. Whether the index can firmly consolidate above this level during the morning session will likely set the directional tone for the afternoon and the closing auction.
The highly anticipated U.S. July CPI report is a key indicator for gauging U.S. inflation trends. A stronger-than-expected reading could dampen expectations for Federal Reserve rate cuts and weigh on U.S. equities. Conversely, confirmation of slowing inflation could boost expectations for earlier easing and strengthen risk appetite. The Tokyo market is expected to trade with one eye on this data, with position-adjustment moves potentially intensifying toward the close ahead of the release.
The Nikkei has maintained a strong upward trajectory, and many market observers view a recovery of the 67,000 yen level as only a matter of time. However, concerns about overheating after the rapid ascent and caution over a potential correction phase in U.S. markets persist. Today's session is set to test the resilience of Japanese equities as profit-taking and yen-driven buying intersect.
