Japan equity memo: Nikkei 225 down 11.4% on recent high, past trends and near-term scenarios

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Japan equity memo: Nikkei 225 down 11.4% on recent high, past trends and near-term scenarios

Nomura | Japan equity memo: Nikkei 225 down 11.4% on recent high, past trends and near-term scenarios 18 July 2026

Technical valuation yardsticks, near-term focus points and scenarios

The next downside resistance points for the Nikkei 225 and the TOPIX, assuming they

continue to fall, are likely to be the 100-day moving averages of around 61,500 and 3,830

respectively (Figure4). Whereas there are not many concentrated trading zones for the

Nikkei 225 down to around 60,000, the TOPIX is likely to attract buying on weakness at

around 3,800–3,900 (Figure5). Both the Nikkei 225 and the TOPIX are trading above

their median P/Es since 2000, but we think this can be justified by scope for upward

revisions to profit forecasts (Figure6). Our main forecast scenario still has the TOPIX at

4,100 at end-September and at 4,200 at end-December 2026, and the Nikkei 225 at

67,000 at and at 68,000 over the same time periods (Figure7; see our 17 July 2026

report Japaneseequitiesinvestmentstrategy(July)-Enteringresultsseasonwith

overconcentrationconcerns).

In the near term, we expect a market marked by reversals as results season peaks from

the last week of July through early August. Through the end of July, we expect investors

to remain concerned about overconcentration. At the same time, we could well envision a

resumption of the AI and semiconductor rally from August onwards if results from major

semiconductor and electronic components companies substantially exceed consensus.

On the supply–demand front, we expect support from share buybacks by nonfinancial

corporations and from strong appetite for dip-buying by individual investors.

Fig. 2: Share price indices for 17 major sectors