Insights 
VT 
The Bank of Japan lifted its policy rate to 0.75% on Friday, marking a decisive step away from its long-standing ultra-accommodative stance.
Although the move had been largely priced in, markets interpreted the hike as a vote of confidence in Japan’s economic momentum, particularly with core inflation steady at 3.0% and export data beating expectations.
In a somewhat counterintuitive response, the yen softened slightly after the announcement. Attention instead shifted to Governor Kazuo Ueda’s remarks, which suggested the eventual terminal rate could fall anywhere between 1.0% and 2.5%.
This guidance has prompted investors to reconsider the outlook for policy tightening, with growing speculation that the BOJ may deliver more than a single rate increase in 2026.
Technology Shares Drive Nikkei Gains
Friday’s rally was led by technology names, with chip equipment maker Advantest climbing 1.59% and robotics specialist Fanuc rising 2.68%. The move tracked ongoing strength in the Nasdaq, which continues to benefit from AI-related optimism and easing US inflation pressures.
A surprise drop in US core CPI to 2.7% further boosted global risk appetite, even as Federal Reserve officials maintained a cautious tone on the timing and pace of rate cuts.
Positive sentiment across the global tech sector also lifted Asian markets more broadly. Equity indices in Taiwan and South Korea both advanced by more than 1%, while Japan’s Topix index edged 0.05% higher.
Technical Analysis
The Nikkei 225 is consolidating around 49,511, up 0.56% on the session. Despite a loss of momentum since peaking at 52,669 in November, the broader bullish structure remains intact.
Prices continue to trade comfortably above longer-term support levels, while the 30-day moving average is still sloping higher, indicating that buyers remain in control of the trend.
However, the MACD is showing early signs of bearish divergence, with weakening histogram bars and the MACD line slipping below its signal line.
The index has largely moved sideways throughout December, and a decisive break above the 50,000 mark may be required to reignite upside momentum.
On the downside, a sustained move below the 47,000–46,500 zone could open the door to a deeper correction into early 2026. For now, traders are likely to remain patient as the market tests the boundaries of its current range.
Bottom Line
What was once viewed as a potential headwind, a BOJ rate hike, is now being interpreted as a signal of orderly policy normalisation rather than economic stress.
With technology stocks providing strong leadership and the Nasdaq offering supportive global cues, the Nikkei appears well placed heading into year-end, particularly if the BOJ’s tightening cycle remains measured.
