Nikkei 225 Technical: Bullish trend remains intact despite Japan’s PM resignation

[Ben Graham]

This is a follow-up analysis and update of our prior report, “Nikkei 225 Technical: A potential bullish reversal looms after a 4% decline as market breadth improves with earnings upgrade”, published on 22 August 2025.

The price actions of the Japan 225 CFD Index (a proxy of the Nikkei 225 futures) have staged the expected bullish reversal after the test on the 41,760 key short-term pivotal support on 2 September 2025 (printed an intraday low of 41,688) and rallied by 3.6% to hit 43,203 on last Friday. 5 September.

In today’s Asia session, it gapped up and added 1.7% to print a current intraday high of 43,850, just a whisker away from the recent all-time high of 43,942 printed on 18 August, on the backdrop of the resignation of Japan’s Prime Minister Ishiba on Sunday.

Japan’s PM contenders are likely to advocate for fiscal stimulus measures

The Liberal Democratic Party (LDP) members are likely to vote for their leader in early October, with two leading contenders being Sanae Takaichi, a former internal affairs minister, and Agriculture Minister Shinjiro Koizumi, the son of a former prime minister.

Both contenders tend to have a more liberal stance towards fiscal policy and support more fiscal stimulus measures.

Let’s now take a closer look at the latest key technical elements to decipher its next short-term (1 to 3 days) directional bias and key levels to watch on the Japan 225 CFD Index.

Fig. 1: Japan 225 CFD Index minor trend as of 8 Sep 2025 (Source: TradingView)

Fig. 2: JGB yield curves (30-YR/2-YR & 10-YR/2-YR) major trends as of 8 Sep 2025 (Source: TradingView, click to enlarge chart)

Preferred trend bias (1-3 days)

Maintain the bullish bias on the Japan 225 CFD Index with a tightened short-term pivotal support now at 43,060/42,850 for the next intermediate resistances to come in at 44,050/44,110 and 44,840/44,970 (Fibonacci extension cluster and towards the upper boundary of a minor ascending channel from 1 August 2025 low) (see Fig. 1).

Key elements

• Price actions of the Japan 225 have traded back above the 20-day moving average, which reinforces the ongoing short-term/minor bullish impulsive up move sequence.
• The hourly RSI momentum indicator has not flashed at a bearish divergence condition as it hit its overbought zone (above 70 level) in today’s Asia session.
• The major bullish breakout (steepening conditions) of the JGB yield curves since June 2022 has a direct correlation with the movements of the Nikkei 225, and the major uptrend phases of the JGB yield curves' steepening remain intact so far, in turn, may trigger a further positive feedback loop into the Nikkei 225 (see Fig. 2).

Alternative trend bias (1 to 3 days)

Failure to hold at the 43,060/42,850 key short-term support for the Japan 225 CFD Index negates the bullish tone for a minor corrective decline to expose the next intermediate support at 42,260.

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