Japanese stocks have gone parabolic since a week ago, as investor optimism returned and that saw the Nikkei break out to its highest levels since 1990 last week. There was talk of foreign investors coming in big time, amid a change in heart on the outlook of the Japanese economy.
As Japan looks to secure its escape from deflation, the macroeconomic prospects are believed to be brightening and that has lit up the eyes in the corporate world apparently. That is leading to investors warming up more to the idea that Japanese stocks may well still go much higher, despite scaling back to the highs last seen in August 1990.
But nothing ever moves in a straight line in markets. And with every parabolic rise, there is the danger of running into an "air pocket" of sorts. And that could be what is happening today. The Nikkei just met a wall of offers with a quick 1% drop, erasing earlier gains in a fall back under 31,000 currently.
I don't see any major headlines to have caused this, so that is perhaps the most plausible explanation for the latest price action.
