Nikkei 225: Bullish reversal above 45,000, no negative impact from BoJ’s ETF unwind

[Ben Graham]

This is a follow-up analysis and timely update of our prior report, “Nikkei 225 Technical: Bullish trend remains intact despite Japan’s PM resignation”, published on 8 September 2025.

The Japan 225 CFD Index (a proxy of the Nikkei 225 futures) has continued to remain in a bullish trend as expected and rallied by 5.3% to hit a fresh all-time high of 45,956 on last Thursday, 18 September 2025, ex-post FOMC.

Thereafter, the Japan 225 CFD Index staged a minor corrective pull-back of -3.2% to print an intraday low of 44,485 on Friday, 19 September 2025, on the onset of the Bank of Japan (BoJ) announcement to start unwinding its massive hoard of around 79.5 trillion yen of exchange-traded funds (ETF) by market value as of mid-September tied to Japan benchmark stock indices.

BoJ aims to sell its ETF holdings at a pace of around ¥620 billion per year by market value, or ¥330 billion by book value, starting in 2026. It will be a gradual unwinding process that may take more than 100 years to complete under the current plan. Additionally, it marks the first time the BoJ has laid out a plan for offloading the assets it has accumulated over years of ultra-easy monetary policy.

Let’s now examine a fundamental factor that still supports a medium-term bullish trend in the Nikkei 225.

Earnings revision continues to get upgraded for Japanese equities

Fig. 1: Japan & US Citigroup Earnings Revision Index as of 19 Sep 2025 (Source: MacroMicro)

Sell-side analysts have continued to upgrade the earnings growth potential of the Japanese stock market. Based on the latest data from the Citigroup Earnings Revision Index for Japanese equities as of 19 September 2025, it rose to 0.34 from the previous reading of 0.19 on 29 August 2025 (see Fig. 1).

The Japan Citigroup Earnings Revision Index has been trending upwards since 20 June 2025, printing -0.35, which suggests that analysts, on average, are becoming more optimistic about the outlook for corporate earnings in Japan, in turn supporting the ongoing medium-term bullish trend in the Nikkei 225.

In addition, the pace of analysts’ earnings upgrades in Japan rose at a steeper pace since 29 August 2025, versus the US Citigroup Earnings Revision Index.

We now focus on the short-term (1to 3 days) trajectory, key elements, and key levels to watch on the Japan 225 CFD Index from a technical analysis perspective.

Fig. 2: Japan 225 CFD Index minor trend as of 23 Sep 2025 (Source: TradingView)

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 45,000. A clearance above 45,960 increases the odds of bullish impetus for the next intermediate resistances to come in at 46,430/46,580 and 46,870 (Fibonacci extension cluster and towards the upper boundary of a steeper minor ascending channel from the 2 September 2025 low) (see Fig. 2).

Key elements

• The price actions of the Japan 225 CFD Index have continued to oscillate above its 20-day and 50-day moving averages, which suggests that its minor and medium-term uptrend phases remain intact.
• The hourly RSI momentum indicator of the Japan 225 CFD Index has exhibited a bullish momentum condition as it managed to trend higher above an ascending support and has not reached its overbought zone (above the 70 level).

Alternative trend bias (1 to 3 days)

A break below the 45,000 key short-term support for the Japan 225 CFD Index invalidates the bullish acceleration scenario to kickstart a minor corrective decline sequence to expose the next intermediate supports at 44,560 and 44,050.

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