Nikkei 225 Forecast: Japan Stocks Eye 67,000 as Inflation Cools

Japanese stocks continued to rally on Friday, with the Nikkei 225 climbing on a rebound in risk sentiment throughout Asia. The prospect of a U.S.-Iran peace deal helped alleviate current worries about an escalating Middle East situation, sending oil prices down in U.S. trading.

This was good for the Nikkei as Japan is heavily reliant on imported energy. When oil prices fall, it takes inflationary pressures off, boosts sentiment on export and tech, and is good for corporate margins. Asian markets were also boosted by the overnight record close in the Dow Jones that gave investors greater confidence to increase their holdings of Japanese stocks.

The weaker inflation data also supported the strong move in Japanese stocks. The chart below shows that the inflation rate in Japan dropped to 1.4% in April. This was the lowest since March 2022. This indicates that the Bank of Japan will face reduced pressure to hike interest rates in near future. A slower pace of rate increase supports the financial conditions less restrictively and aids valuations for growth and tech stocks.

Japanese Stock Rebounds Signal Fresh Upside for Nikkei 225

Renesas Electronics Corporation also found a bottom at the neckline of the cup and handle pattern at 3,380 and then rebounded higher. This presents the perfect hit of support when the Nikkei 225 hits the 60,000 zone.

On the other hand, NTN Corporation also rebounds from the 380 support level. The black dotted trend line supports this rebound.

TDK Corporation has surged higher after forming a low at 2,850 and then rallying higher again.

On the other hand, the bottom formation in SoftBank and the strong surge after the rebound from the 5,000 level indicate continued strength in SoftBank during the next few sessions.

Similarly, Ibiden Co. Ltd. has surged higher after forming a bottom around the 15,000 level.

On the other hand, Mitsui Kinzoku Co. Ltd. is also trending higher from the bottom and is poised to move to new record levels.

The majority of stocks in Japan are forming a bottom and trying to continue higher, which indicates a bullish setup for Nikkei 225.

Nikkei 225 Breakout Signals Further Upside Toward 67,000

The long-term picture for the Nikkei 225 remains strongly bullish, as the index has broken the 60,000 level.

After the breakout at 60,000, the index surged to a high at 63,800 and then corrected back toward 60,000. Now, the index will likely rally toward 67,000 in the short term. The monthly candle for April was very strong after the formation of a negative candle in March. This indicates that the index will likely remain strong in May and June.

This strength is also evident on the short term hourly chart. The chart shows that the index formed a low at 59,300 and recovered back toward 61,800 by forming a V-shaped pattern. A recovery above 61,800 suggests a strong and quick rally toward 63,800.

The short-term target of this strong rebound from the 60,000 level remains 67,000. The ascending channel pattern defines this target in the chart below.

The primary trend in the Nikkei 225 has been defined by the ascending channel pattern since the April 2025 lows. Therefore, the next move in the Nikkei 225 will likely be higher.

However, high oil prices and U.S.-Iran tensions are creating a risk for the Nikkei 225 in 2026, which will likely be watched. A break below 60,000 will indicate further downside to 58,000.

Bottom Line

The Nikkei 225 remains in a good position as the lower oil prices, better inflation and improved risk sentiments support the Japanese equities. A decline in the inflation in Japan lowers the pressure exerted by the Bank of Japan to increase rates in the near future. This keeps the growth and the technology stocks positive.

The bullish reversal in the key Japanese stocks also attests that the market is developing a more solid foundation following the recent correction. The bullish setup will continue to exist as long as the Nikkei 225 maintains a position above 60,000. The next upside target is 67,000. Nevertheless, a new wave of oil price surge or a new wave of U.S.-Iran tension may dampen the mood and drag the index lower.

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