As long-term interest rates rose, financial stocks were bought.

This week's Nikkei average rose by 986.61 yen (+2.56%) to 39,583.08 yen over the week. While the trading value of the main market did not increase significantly, the Nikkei average rose above the return highs in May and June and up to the 39,700 yen level since April, in the midst of a market trend led by futures. TOPIX also saw a temporary update of its YTD high.

Although there is no sign of active buying and selling of Japanese stocks, foreign exchange rates have resulted in a significant increase in yen depreciation and dollar appreciation, pushing up stocks with a high proportion of overseas revenue such as automobile stocks. Long-term interest rates have also had an impact, with the indicator for new 10-year government bond yields rising to 1.085% at one point, leading to an increase in financial stocks. As a result, the Nikkei average broke through the 39,300 yen resistance level and expanded its gains, including futures buybacks. While the upper limit of the range was heavy towards the end of the week, TOPIX temporarily exceeded its YTD high of 2820.45 points during the trading day thanks to purchases of stocks with large market capitalizations.

In the third week of June, foreign investors sold physical stocks worth 18.5 billion yen, sold TOPIX futures worth 315.8 billion yen, and sold 225 futures worth 304.9 billion yen, resulting in a total sold of 639.2 billion yen. On the other hand, individual investors bought physical stocks worth 191 billion yen overall, and trust banks sold physical stocks worth 191.8 billion yen.

TOPIX temporarily updated its YTD high.

The U.S. stock market fell on June 28th. The Dow Jones average closed at 39,118.86, down 45.20 yen (-0.12%) from the previous day, the Nasdaq fell 126.08 points (-0.71%) to 17,732.60, and the S&P500 fell 22.39 points (-0.41%) to 5,460.48. The Nikkei 225 futures in the Osaka Exchange's night session closed at 39,820 yen, up 200 yen from the previous day's normal closing price.

In this weekend's primary market trading value ranking, Mitsubishi UFJ <8306> became the top financial stock and lively trading was observed. As long-term interest rates rose, large market cap bank stocks, insurance stocks, securities stocks, and other stocks were bought while A-REIT ETF, the most representative of high-interest rate disadvantaged sectors, was solid, so it is unlikely that "Bank of Japan trades" will be entered in anticipation of the Bank of Japan's monetary policy meeting to be held at the end of July.

In this week's primary market, the overall buying trend was on TOPIX core 30 stocks, even though the trading value did not increase significantly. Similar to the upward trend seen in mid-January of this year, a wide range of industries and stocks were bought. Although it is unclear who the main buyer is for this financial stock rise this week, if it is determined that foreign investors, who have been quiet recently, entered the buying market, the Nikkei average and TOPIX could further rise.

There is a heightened sense of alertness towards intervention, but there is also a view that intervention is difficult to implement. While the exchange rate has progressed to dollar appreciation and yen depreciation up to the level of 161 yen per dollar, Minister of Finance Kanda and Minister of Finance Suzuki have increased verbal intervention, but their effectiveness is limited. Some believe that since Kanda made a statement in March of this year that "It cannot be said that a 4% fluctuation in dollar-yen over a period of two weeks is mild," the government and Bank of Japan cannot intervene in buying yen and selling dollars unless a 4% yen depreciation and dollar appreciation is confirmed within two weeks. Applying this rule, since the exchange rate was around 157 yen per dollar two weeks ago, an exchange rate of 163 yen is required to implement foreign exchange intervention.

The exchange rate progresses with yen depreciation and dollar appreciation up to the level of 161 yen per dollar, and Minister of Finance Kanda and Minister of Finance Suzuki have increased verbal intervention, but their effectiveness is limited. It has been suggested that the market's opinion is that in the current high speed of yen depreciation, implementing an exchange rate intervention is difficult by relying on verbal intervention alone.

Moreover, some believe that the US Treasury's addition of Japan to its list of currency-manipulating countries has made it harder for the government and the Bank of Japan to intervene in the market. Other factors that are contributing to speculation include the replacement of Kanda, who was in charge of currency intervention, and so on.

However, since no one outside of government and Bank of Japan officials knows the specific rules governing currency intervention, there is still a sense of caution. When currency intervention was last implemented in April-May, for instance, the USD/JPY fluctuated from around 160.10 yen on April 29 to around 151.90 yen on May 3, with an appreciation of over eight yen, providing good selling points to companies with high overseas sales ratios if and when currency intervention is implemented.

On July 5, US employment statistics will be announced. Next week, in Japan, June Tankan survey (June survey), June consumer confidence index, June monetary base on July 2, and May preliminary index of business conditions and other indicators are scheduled to be announced. Overseas July 1: China's Caixin manufacturing PMI for June, UK: June consumer price index (CPI, revised value), US: June PMI (revised value), ISM manufacturing business activity index, July 2: Eurozone June CPI (revised value), May Eurozone unemployment rate, US: May JOLTS employment numbers, Australia: May retail sales, China Caixin services/comprehensive PMI for June, US: June ADP employment numbers, weekly initial claims for unemployment benefits, May trade balance, June services/comprehensive PMI (revised), May manufacturing new orders, durable goods orders (confirmed), June ISM non-manufacturing business activity index, weekly crude oil stocks, June FOMC meeting minutes, and July 5: US June employment statistics.

Next week, in Japan, June Tankan survey (June survey), June consumer confidence index, June monetary base on July 2, and May preliminary index of business conditions and other indicators are scheduled to be announced.

Overseas July 1: China's Caixin manufacturing PMI for June, Turkey: June manufacturing PMI, Germany: June consumer price index (CPI, preliminary), US: June PMI (revised value), ISM manufacturing business activity index, July 2: Eurozone June CPI (preliminary value), May Eurozone unemployment rate, US: May JOLTS employment numbers, July 3: Australia: May retail sales, China Caixin services/comprehensive PMI for June, US: June ADP employment numbers, weekly initial claims for unemployment benefits, May trade balance, June services/comprehensive PMI (revised), May manufacturing new orders, durable goods orders (confirmed), June ISM non-manufacturing business activity index, weekly crude oil stocks, June FOMC meeting minutes, and July 5: US June employment statistics.