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Investing.com-- Japanese stocks are likely to remain under pressure in the near term due to concerns over U.S. tariffs, a potential economic slowdown, and the Bank of Japan’s policy stance, Citi analysts said in a research note.
The Nikkei 225, which had been trading in a range between 38,000 and just above 40,000 since October 2024, recently fell below 38,000, Citi noted.
Citi analysts attributed this decline to worries over the U.S. economy following weak economic data, uncertainty about President Donald Trump’s tariff policies, a stronger yen, and a correction in high-tech stocks correlated with the U.S. market.
Trump has proposed tariffs on key industries, including autos, semiconductors, and pharmaceuticals, alongside an investigation into reciprocal tariffs that could lead to further trade barriers, Citi analysts said in a note.
Analysts expect it will take time for the full scope of the administration’s trade policy to become clear, with a key report on reciprocal tariffs due in August.
Despite these risks, Citi noted that Japanese stocks have already priced in much of the negative sentiment, with valuations lagging global peers.
While short-term corrections are possible due to tariff-related headlines, the downside may be limited, with the Nikkei 225 potentially finding support around 35,500 and the TOPIX near 2,550, Citi analysts added.