EBC Markets Briefing | ​Nikkei 225 down on US fearmongering

The Nikkei 225 index weakened on Thursday as the US could join Israel's air strike on Iran. Oil prices and the yen benefited from geopolitical uncertainties, adding to headwinds for Japanese firms.

PM Ishiba and Trump failed to reach an agreement on a trade package on the sidelines of the G7 summit, an outcome that leaves the Asian nation inching closer to a possible recession.

Tokyo is subject to a 25% levy on cars and auto parts and a 50% tariff on steel and aluminium. A 10% across-the-board levy on other goods is set to rise to 24% in early July.

Manufacturers grew less confident about business conditions in June and expressed caution about the outlook for the next three months, according to the BOJ's monthly poll, though the service sector stayed calm.

Exports in May declined 1.7% year over year, marking the sharpest decline since September 2024. Notably shipment of motor vehicles to the US plummeted 24.7%, which is particularly disturbing.

BOJ Governor Kazuo Ueda said on Tuesday near-term focus was on downside risks to economy with the hit from tariffs seen intensifying in the second half of this year despite of sticky inflation.

The Nikkei index stays comfortably above 200 SMA, but bearish MACD divergence indicates the uptrend could stall soon A push below 38,000 is on the cards.

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