Nikkei 225 Forecast: Strong Bank Lending Supports Rally Despite Oil Risks

The Nikkei 225 began with pressure on Wednesday following renewed uncertainty about the U.S.-Iran conflict, higher inflation and oil prices. The index was down by over 0.50% as traders remained cautious despite mixed regional market signals. Japan relies heavily on oil imports and now one of the major threats is higher energy prices.

Meanwhile, robust bank lending indicates that certain sectors of domestic economy are holding up well. That means a mixed environment for the Nikkei 225 as the geopolitical risk dampens sentiment, while improved credit growth is a boost to banks and domestic demand.

Oil, Inflation and Bank Lending Shape the Nikkei 225 Outlook

Rising oil prices are the main concern for Japanese equities. WTI oil trades above $100 a barrel while Brent oil remains above $105 a barrel. The increase can affect Japanese imports as well as put pressure on inflation.

This is important as household spending can decline with higher inflation. It creates pressure for the Bank of Japan to implement a tighter policy. The strong decline in spending was already observed in February and March.

That is headwind for the Nikkei 225 as rising expenses can impact corporate earnings, particularly for transport, manufacturing and consumer firms.

Another factor to consider is the U.S.-Iran conflict. The comments by President Trump about “weak” ceasefire sparked fears of a return to the military conflict. The price of oil could increase further if the conflict resumes. This would put additional pressure on Asian markets.

Investors might also become more protective particularly as the S&P 500 and Nasdaq retreat from record levels. The Nikkei 225 is tightly tied to the sentiment for risk taking in the world and technology. If tech sentiment in the United States is weaker, that can limit any upside in Nikkei 225 in the short term.

But the market finds domestic support from the stronger bank lending. The chart below shows that the bank lending in Japan increased to 5.4% in April 2026. This was the fastest growth since March 2021. This increment was led by the major banks with 8% which is positive for the financial sector of Japan.

The strong growth in loan suggests that credit demand remains strong and companies are willing to borrow despite the global energy crisis. This supports the Topix that has more exposure to financial and value stocks. But the Nikkei 225 remains vulnerable as it has heavy exposure to exporters and technology names.

Nikkei 225 Bullish Channel Supports Move Toward 65,000

From a technical perspective, the daily chart for Nikkei 225 shows a strong bullish trend within the ascending channel. A break above $60,000 has opened the door for the next target towards the $65,000 level in the next few sessions.

As long as the $60,000 support level holds, the index will likely move towards the $65,000 soon. This is a strong trend.

The surge in the Nikkei 225 is also observed on the monthly chart which shows strong bullish momentum. The strong rally and bullish candle in April 2026 have already produced positive trend. This trend indicates the $65,000 level as the immediate next target.

As long as the $50,000 level holds, the price will likely go towards $65,000 in the next few sessions.

Bottom Line

Investors will remain cautious in the short term due to higher oil prices, inflationary pressures and the looming U.S.-Iran conflict. The risks could also put pressure on the BoJ and curb the gains of exporter and technology stocks. But the strength of the domestic economy is reflected in bank lending, which suggests that Japan has backing from within its own economic sphere, particularly in the financial sector. Technically, the breakout above 60,000 suggests a move to 65,000. Therefore, consolidations above 60,000 will provide support to reach the 65,000 in the short term.