Japan's Topix index rises 0.8% to 2,938.27 at morning close

Japan's Topix index rises 0.8% to 2,938.27 at morning close

The Japanese Topix index surged 0.8% to close at 2,938.27 on Monday, July 2, 2025, according to the latest market data. This morning's rally follows a series of declines in the previous weeks, driven by global economic concerns and currency fluctuations. The index, which includes all listed stocks on the Tokyo Stock Exchange, gained 23.44 points from its previous close.

The Topix index's performance was bolstered by a 0.8% increase in the broader Nikkei 225 index, which closed at 2,834.54. The Nikkei, a benchmark index for Japanese stocks, also benefited from the positive global market sentiment and optimism surrounding potential interest rate cuts by the Federal Reserve.

The yen, which has been a significant driver of market volatility, traded at around ¥147.70 against the dollar on Monday, after surging more than 2% on Friday. The currency's appreciation was largely due to speculation that the Federal Reserve will cut rates, which has been a key factor in the recent market movements.

The latest U.S. employment data, which showed downward revisions to jobs growth, also played a role in the market's volatility. The nonfarm payrolls were marked down by nearly 260,000 in May and June combined, raising concerns about the world’s largest economy. However, the market's reaction was relatively mild compared to the August 2024 collapse, which was also accelerated by weak U.S. jobs data.

The relative calm in the Japanese market is attributed to the improved communication by the Bank of Japan (BOJ) and the steady corporate reforms. The BOJ's decision to raise rates again in January, despite last summer's turmoil, made it clear that the rate hike path will continue. This has helped investors to better anticipate future rate hike scenarios and has contributed to the market's resilience.

The Topix index's performance is also supported by a record level of corporate share buybacks and hopes that governance reforms will unlock long-term value for shareholders. Domestic market watchers see potential for more upside, especially in domestic demand-driven stocks, if the government pursues fiscal expansion.

However, the trajectory of Japanese equities still hinges on the yen's stability. Lingering trade worries and uncertainty around Prime Minister Shigeru Ishiba's fate could still boost safe-haven demand for the yen, stoking volatility.

The market's optimism is shared by strategists at Goldman Sachs Japan Co. and Bank of America Securities Co., who have hiked their forecasts for the Topix and Nikkei in recent weeks. They cite hopes that US tariffs won't derail Japan’s economy as much as feared due to a truce limiting levies to 15%.

References:
[1] https://www.japantimes.co.jp/business/2025/08/04/markets/japan-stocks-slump/
[2] https://www.bloomberg.com/news/articles/2025-08-04/traders-burned-by-august-meltdown-keep-betting-on-japan-stocks
[3] https://www.nasdaq.com/articles/japan-stock-market-may-stop-bleeding-tuesday