Japan’s Nikkei Stock Buoyed by US Bank Earnings, Cooling Inflation, but Firm Yen Caps Gains (UPDATE 1)

Reuters

13:39 JST, January 16, 2025 (updated at 16:30 JST)

TOKYO (Reuters) – Japan’s Nikkei share average rose on Thursday, tracking a rally in Wall Street on robust U.S. bank earnings and a cooling in core consumer inflation.

The Nikkei added 0.33% to close at 38,572.60, snapping a five-day losing streak.

However, gains were capped by a rallying yen as traders ramped up bets that the Bank of Japan (BOJ) will raise interest rates at its policy meeting next week.

The broader Topix index finished flat.

Financials were among the Nikkei’s best performing sectors after U.S. banks, including JPMorgan and Goldman Sachs, reported a surge in profits overnight. Nomura Holdings, Japan’s biggest brokerage, advanced 3.27%.

Moderating U.S. core inflation saw a revival in wagers for the Federal Reserve to lower rates again by July, boosting investor sentiment.

At the same time, comments from BOJ Governor Kazuo Ueda and one of his deputies, Ryozo Himino, this week opened the doors for a rate hike on Jan. 24, barring any resurgence in market volatility after Donald Trump’s inauguration as U.S. President.

“If the U.S. earnings season continues to produce robust results like we saw from financials yesterday, it’s likely that stock markets will perform well on that,” said Maki Sawada, a strategist at Nomura Securities.

“But heading into the BOJ meeting next week and Trump’s inauguration, the uncertainty surrounding those big events are a growing weight on sentiment.”

The yen strengthened to a nearly one-month high of 155.21 per U.S$., preventing a bigger rally for the Nikkei and weighing on automakers in particular, as a stronger home currency reduces the value of overseas revenues. Nissan slumped 4.42% and Toyota slid 2.21%.

By contrast, home furnishings retailer Nittori, which sources a lot of its products from abroad, jumped 4.95% to be among the Nikkei’s top performers.