The Nikkei 225 tracks 225 large-cap Tokyo Stock Exchange companies — Toyota Motor, Sony Group, SoftBank Group, Nintendo, Keyence Corporation, Fast Retailing (Uniqlo), Mitsubishi UFJ Financial, Shin-Etsu Chemical, Fanuc, and Recruit Holdings lead the index.
The Bank of Japan abandoned Yield Curve Control (YCC) in 2024 and raised its policy rate to 0.5% in January 2025. Each BOJ rate hike causes Yen to strengthen (USD/JPY falls), compressing Japanese exporter earnings in Yen terms. Toyota alone generates 70%+ of revenues outside Japan.
On days of broad Asian risk-off sentiment, Nikkei and Nifty tend to decline together. The August 2024 Yen carry trade unwind — Nikkei fell 12% in a single session — simultaneously caused Nifty to gap down 3%. Indian traders use Nikkei as a pre-market barometer during the 6:00–8:00 AM IST Asian session.
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