Japan’s Nikkei 225 Faces Uncertainty as Rates Rise
By Jim Iuorio
Loading...

A Changing Narrative?

In March, the BOJ abandoned its negative rate policy, and in July, it hiked rates to 0.25%. The question that the currency trading world is asking is: are the factors that fueled these multi-year trends now reversing? 

With uncertainty ahead in Japanese equities, there is rising interest in Nikkei 225 futures – average daily volume year-to-date is up 8% from 2023, reaching 41k contracts.

Nikkei Futures ADV OI

The October launch of Micro Nikkei futures also complements the existing suite of micro-sized contracts in domestic equities, offering more precise trading and risk management in an increasingly important international space – since their debut, Micro Nikkei futures have already traded a combined 65,996 contracts.

Micro Nikkei futures

If a trader believes that the Nikkei will head higher from here, they could express that by buying Micro Nikkei futures. Alternatively, if a trader believes that the Nikkei's highs could be coming to an end, they could sell Micro Nikkei futures. 

On the surface, it looks like the trends are reversing – the Fed has begun what could be an extended easing cycle, and the BOJ has begun a hiking cycle, albeit a very casual one, as evidenced by their pause at the September meeting and again at the October one. However, that answer could also be an oversimplification. In the week that followed the Fed's initial 50 basis point ease, we began to see economic data suggesting an accelerating economy. Gross domestic product (GDP), employment data, and retail sales came in better than expected, and some analysts began to question whether rates were lowered too far.

Perhaps both central banks are solely focused on inflation, as Japan's September read of year-over-year Consumer Price Index (CPI) is 2.5% and the U.S. CPI is 2.4%. The difference, however, is that the U.S. CPI has continued a steady deceleration from its highs and sits at the lowest level in almost 3.5 years, while Japan's CPI has ticked up from a low of 2.2% earlier this year. However, a radical reacceleration of inflation in Japan could push the BOJ to hike more aggressively, potentially boosting the yen at the expense of the Nikkei.

Watch a discussion on Japan’s economic resurgence in the video above.

Loading...

About the author

Jim Iuorio
Jim Iuorio, Managing Director, TJM Institutional Services

Jim Iuorio is managing director of TJM Institutional Services and a veteran futures and options trader. Jim has spent his career brokering futures and options trades for large institutional clients in equity indexes, interest rate products, commodities and foreign exchange. His recommendations to clients blend macro-economic themes with technical analysis.

 

 

OpenMarkets is an online magazine and blog focused on global markets and economic trends. It combines feature articles, news briefs and videos with contributions from leaders in business, finance and economics in an interactive forum designed to foster conversation around the issues and ideas shaping our industry.

All examples are hypothetical interpretations of situations and are used for explanation purposes only. The views expressed in OpenMarkets articles reflect solely those of their respective authors and not necessarily those of CME Group or its affiliated institutions. OpenMarkets and the information herein should not be considered investment advice or the results of actual market experience. Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade. BrokerTec Americas LLC (“BAL”) is a registered broker-dealer with the U.S. Securities and Exchange Commission, is a member of the Financial Industry Regulatory Authority, Inc. (www.FINRA.org), and is a member of the Securities Investor Protection Corporation (www.SIPC.org). BAL does not provide services to private or retail customers.. In the United Kingdom, BrokerTec Europe Limited is authorised and regulated by the Financial Conduct Authority. CME Amsterdam B.V. is regulated in the Netherlands by the Dutch Authority for the Financial Markets (AFM) (www.AFM.nl). CME Investment Firm B.V. is also incorporated in the Netherlands and regulated by the Dutch Authority for the Financial Markets (AFM), as well as the Central Bank of the Netherlands (DNB).

©2025 CME Group Inc. All rights reserved