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Nikkei 225: Japan stocks surges as Japan plans $20 billion windfall for landlords


Japan stocks were in a happy mood today as the market ignored dire economic data from the country and instead focused on a fresh stimulus pitch by the Japanese government. The blue-chip Nikkei 225 index rose by more than 2.20%, with most of its constituent companies in the green.

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Japan stocks rise on new government pledge

According to the Nikkei Asian Review, the ruling party is mulling a plan to help small businesses cover their rent in the next six months. The plan, which is set to be the biggest such subsidy in the world, will cost about $20 billion. It will see small and medium enterprises receive a monthly stipend of about $4,700 to fund their rent.

As part of the proposal, these businesses will need to prove that they have lost about 30% or more in revenue in the past 3 months. Alternatively, they will need to verify that they lost 50% revenue in April. Most small companies will be able to verify his because of the little activity that has been going on.

At the same time, the plan has received support from a group of opposition parties, meaning that it will pass in parliament.

The new round of stimulus comes more than 1 month after Shinzo Abe launched a $1 trillion stimulus package and a few weeks after he launched a nationwide state of emergency.

Nikkei 225 joins global rally

The Nikkei 225 index was not the only upbeat bourses. In Asia-Pacific, the Shanghai index rose by 1% while the KOSPI rose by 1.10%. In Australia, the ASX 200 rose by 60 basis points. Meanwhile, in the United States, the Dow Jones, NASDAQ 100 and the S&P 500 indices rose by more than 1%.

As the Nikkei 225 index surged, investors ignored weak economic data from the country. The numbers showed that the services PMI dropped to a low of 21.5 while household spending tumbled by 4.0%. Similarly, overtime pay, a crucial gauge of how companies are doing dropped by 4.1%.

Nikkei best and worst performers

Most companies in the Nikkei 225 index declined today. They were led by DeNa Corp, whose shares tanked by 2.48% and followed by Tokai Carbon and CyberAgent, whose shares dropped by about 2%. On the other hand, the best performers were JTEKT, Okuma, Sumitomo, and Alps Electric, whose shares jumped by more than 7%.

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Nikkei 225 technical outlook

On the daily chart, the Nikkei 225 index has been on an upward trend and is being guided by the green trend line. The index has also moved slightly above the 50-day exponential moving average and is along the 50-day EMA. Therefore, I expect the upward trend to continue as bulls attempt to test the important resistance level of 20,753, which is at the intersection of the 100-day EMA and the upper side of the channel.

On the flip side, a move below 18,850 will invalidate this trend. This price is at the intersection of the ascending trendline and the lowest swing on April 22.