Japan’s revised leading indicator index is at 104.8, and the coincident index is at 116.0.
by VT Markets
/
Jul 25, 2025
Recent data from the Japan Cabinet Office, released on July 25, 2025, shows that the leading indicator index for May was adjusted to 104.8, up from the previous value of 104.2. The coincident index remains unchanged at 116.0 from April.
The Cabinet Office continues to describe the index as “halting to fall,” suggesting there hasn’t been a recent decline. This consistent data reflects stability similar to previous months.
Economic Outlook and Investment Strategies
These latest figures indicate that the Japanese economy may be stabilizing. The increase in the leading indicator suggests a cautious optimism for the upcoming months. The “halting to fall” assessment hints that the downward trend might be ending.
With this stabilization in mind, we are revising our perspective on Nikkei 225 derivatives. The index has shown recent strength, remaining above the 40,000 mark after a turbulent second quarter. We are considering closing our short positions and are looking into long-dated call options to take advantage of potential growth as we approach the fourth quarter.
Currency and Market Dynamics
This shift in economic outlook could boost the yen, a trend we have anticipated. With core inflation for June holding steady at 2.5%, which is above the central bank’s target, there is increasing pressure to normalize monetary policy. As a result, we are exploring opportunities in USD/JPY put options, especially given the currency pair’s recent struggle to stay above 159, which we see as a significant technical indicator.
This new stability implies that implied volatility on Japanese assets may be overpriced. We noticed a similar trend in late 2016 when the economy shifted from contraction to slow growth, leading the Nikkei Volatility Index to drop from the high 20s to the mid-teens over several months. Therefore, selling strangles on the index, which benefit from minimal price fluctuations, could become a more appealing strategy.
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by VT Markets
Jul 25, 2025
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