Date: 7th April 2026.
NIKKEI 225 Outlook in 2026.
The Japanese NIKKEI 225 has been the best-performing stock market of 2026. Despite difficult market conditions, it has still risen by more than 6%. However, throughout the month of March, while geopolitical conflicts escalated, the NIKKEI 225 was the worst-performing. What does this mean for the Japanese stock market?
Why is the NIKKEI 225 the best-performing of 2026?
The Japanese NIKKEI 225 trend was primarily supported by strong corporate earnings, a weaker yen boosting export competitiveness, and fiscal changes under a new government. Structural reforms and improved shareholder returns have also enhanced confidence, attracting both domestic and international capital.
The new Japanese Prime Minister, Takaichi, is a supporter of fiscal stimulus and a looser policy. For example, the new PM was quick to introduce more tax breaks and restructuring measures aimed at supporting Japanese companies. In addition to this, the new administration further expanded the country's benefits programme, aiming to boost consumer demand and families. As a result, investors were quick to trade the ‘Takaichi Trade’.
In addition, relatively stable monetary policy from the Bank of Japan has provided a supportive backdrop compared to more restrictive policies elsewhere. This has helped sustain liquidity and risk appetite, allowing the index to outperform despite global uncertainty and ongoing geopolitical tensions.
In 2026, up to the point of the conflict, the NIKKEI 225 had risen almost 20% in a period of less than three months.
The Middle East Crisis
The Middle East crisis was the pivotal point at which the trend came to an end. Upon the geopolitical sphere deteriorating, the index lost all gains from 2026 and did not find support until reaching the year’s lows.
The Japanese stock market saw a larger decline in comparison to other competitors as the country is more reliant on oil imports from the Strait of Hormuz. Whereas US and European countries do not rely on that region to necessarily support energy products. A positive factor for the Japanese stock market in recent days is that Iran has allowed a few Japanese ships to pass through the Strait. Nonetheless, the crisis continues to have a negative impact on the Japanese stock market.
What are Analysts Expecting for the NIKKEI 225?
HFM - NIKKEI225 8-Hour Chart
Analysts remain broadly constructive on the NIKKEI 225, although expectations have become more cautious after its strong rally and the recent rise in geopolitical risk. The outlook will largely depend on how the conflict continues to develop.
If the conflict escalates further, the NIKKEI 225 may come under pressure from lower investor sentiment. However, this is something which will be a common issue throughout the global stock market. Under such conditions, the asset will see sell signals strengthen if the price falls below 53,157.60. However, a price above 53,189.00 indicates a bullish outlook based on the 75-period EMA.
If the conflict does end with the Strait being reopened, previous projections may again be relevant. A Reuters poll published on 24 February showed a median forecast of 58,500 by the end of 2026.
Key Takeaways:
The NIKKEI 225 is the best-performing major index of 2026, driven by earnings, a weaker Yen, and pro-growth policies.
The rally reversed sharply in March as Middle East tensions escalated, wiping out earlier gains.
Japan’s reliance on oil imports via the Strait of Hormuz makes its market more vulnerable to geopolitical shocks.
Analysts remain cautiously bullish, but the outlook depends heavily on how the conflict develops.
Always trade with strict risk management. Your capital is the single most important aspect of your trading business.
Please note that times displayed based on local time zone and are from time of writing this report.
Click HERE to access the full HFM Economic calendar.
Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!
Click HERE to READ more Market news.
Michalis Efthymiou
HFMarkets
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.