Nikkei 225 in tight range as Japan Inc slashes buybacks at record pace

The Nikkei 225 index is little moved today as investors digest the latest coronavirus-related news from China. They are also reflecting on the sharp decline in share buybacks in Japan Inc. The index is trading at ¥22,502, which is along the 78.6% Fibonacci retracement level.

Japan companies slash buybacks

Companies use share buybacks as a way of boosting shareholder returns. By buying back their own shares, the companies reduce their outstanding shares, which in turn leads to higher earnings per share. According to Nikkei Asian Review, Japanese companies, including those in the Nikkei 225 have slashed share buybacks by about 78%. The buybacks announced between January and April this year have declined to $8.3 billion. These buybacks were announced by just 146 companies, which is a relatively small number for the vast companies in Japan.

Many companies have downsized their share repurchases plans. Among the most notable ones are Taisei, which dropped its buybacks to 10 billion yen from last year’s 28 billion yen. Other firms in the Nikkei 225 are NTT, NTT Docomo, and KDDDI, which have slashed buybacks by about 700 billion yen.

Coronavirus second wave dampen mood

The Nikkei 225 index also declined due to the second wave of coronavirus. Investors are still digesting news that Apple had closed some of its stores in the United States. Meanwhile, the number of cases in China continued to rise. Yesterday, the country confirmed 18 new cases, mostly in Japan. A day earlier, it had reported 26 cases. There are fears that these cases will continue to rise.

Nikkei 225 top movers

Yahoo Japan is the best performer in the Nikkei 225 index today. The technology’s giant share price is uo by 5.27%. It is followed by Nippon Light Metal, Chugai Pharmaceutical, CyberAgent, and Shionogi, which have gained by more than 3%. On the other hand, the worst performers are Mitsui Engineering, Keio Corp, Yamaha Corp, and DeNA corporation, which have fallen by more than 3%.

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Nikkei 225 technical analysis

On the daily chart below, we see that the Nikkei index declined to a low of ¥21,500 on June 15. Since then, the pair has regained some of its losses but it has also found strong resistance near the 78.6% Fibonacci retracement level. The price is above the 50-day and 100-day exponential moving averages. Most importantly, the trend is relatively bullish if you look at the black trendline.

Still, it seems like there is some indecision at this resistance level. A clear move above this resistance will see bulls attempt to move to the next resistance at ¥22,800. On the other hand, a move below ¥21,500 will invalidate the overall bullish trend. This price represents the lowest level on 15th this month.

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