The Japanese Nikkei share index surged on Friday and now appears poised for an extended rally.
JP225 – Daily Chart
The JP225 vaulted above resistance at the 52,735 level and could create an extended move higher. The former high now serves as support on any retest.
Japan’s top share index shrugged off recent negative sentiment over Chinese relations to hit a new all-time high. The Nikkei surged from a 3-day pullback on hopes for new tariff talks between Japan and the United States.
Stocks were higher after U.S. President Donald Trump said on Friday that the United States is “very close” to a deal with Japan. A top Japanese tariff negotiator is set to visit Washington for the second round of talks this week.
“There is likely to be some progress toward a reduction in tariffs”, said Masahiro Ichikawa, market strategist at Sumitomo Mitsui. “Investors now want to see what Japan has to offer to get a reduction”.
Some analysts are betting on a modest rise in the index this year, with UBS projecting a 54k increase.
“Our target for the Nikkei 225 at the end of 2026 is 54,000, implying upside of around 8%. This is strictly our base-case scenario, which is fundamentally driven by earnings growth,” said Nozomi Moriya at UBS Securities Japan.
“Under the assumption that inflation continues and that wage growth remains in place… companies are more likely to be able to maintain volume growth and price increases,” said Maki Sawada at Nomura Securities.
However, both firms see potential for extended gains if the AI bubble continues in 2026, with 60,000 a potential target.
“That would require exceptionally strong conditions, for example, the current ‘bloated’ situation becoming even more inflated, or the artificial intelligence and data centre boom overheating further,” the Nomura Research Institute said.
The strong move on Friday puts bulls in charge, and traders can look for long entries if sentiment remains settled in the week, with a U.S. trade deal boost possible.
