Nikkei 225 analysis as Warren Buffett ups stake in sogo-shoshas

The Nikkei 225 index is hovering near the highest level in over 33 years as investors react to the decision by Warren Buffett to add more money to Japanese trading houses. The stock was trading at ¥33,370, a few points below the year-to-date high of ¥33,742.

Warren Buffett adds into sogo-soshas

The Nikkei 225 index has been in a strong bullish trend in the past few months. This rally gained steam after Warren Buffett, the founder of Berkshire Hathaway, visited Japan, as we wrote here. And on Monday, the company said that it had added his allocation into the company.

Berkshire Hathaway now holds a 8.5% stake in the five biggest trading houses, which are popularly known as sogo-shoshas. These companies are Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. They are known for sourcing raw materials abroad and shipping them to Japan, a resource-poor country.

He initially bought a 5% stake in the company in 2020 and has now made a profit of over $4 billion in his investments.

The Nikkei 225 index also drifted upwards after the latest interest rate decision by the Bank of Japan (BoJ). In a statement on Friday, the central bank decided to leave interest rates unchanged at -0.1% and the 10-year yield target at 0.0%.

Most importantly, the bank continued its dovish tone by insisting that it will not hesitate to “take additional measures if necessary.” Still, despite this, analysts at ING noted that the bank could change its tone in July, thanks to the weaker yen and the fact that the bank could upgrade its inflation outlook. The report said:

“From now on, we will be closely watching upcoming data releases such as June Tokyo CPI, labour cash earnings, and the movement in JPY, to see if these give a clearer signal of sustainable inflation.”

Nikkei 225 technical analysis

The Nikkei index has been in a strong bullish trend in the past few months. This rally started when the index dropped to a low of ¥24,670 on May 8th of last year. The shares jumped to a high of ¥33,742 this month.

It has jumped above all moving averages while the Stochastic RSI and the RSI have moved close to the overbought level. Therefore, there is a likelihood that the index will likely continue rising as buyers target the next key resistance point at ¥34,000.

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