The Nikkei 225 surged 2.40% to 69,946.64, moving within roughly 4% of its 72,831.73 record. Unlike June's rally, when USD/JPY ran alongside the index to 163.97, the yen pair now trades almost six yen below that peak, held back by a faster Bank of Japan tightening pace, a steadier Fed, fresh intervention risk, and the absence of a new oil shock.
Nikkei clears its August high
The index cleared the 69,608.24 August swing high on its advance toward the record. As long as 68,132.16 support holds, the bias stays higher, with 71,885.52 as the next upside target before the 72,831.73 record comes into direct focus. The breakout strengthens the view that the pullback from the record was a correction of the rise from 50,566.99 rather than the start of a larger downtrend.
Why USD/JPY isn't following the same script
When the Nikkei last set a record in June, USD/JPY was already above 161 and went on to reach 163.97 in late July. This time, USD/JPY sits around 157.7, nearly six yen below that level. Four forces explain the gap.
First, the BoJ's hiking cadence has shortened from roughly six months to around three, with increases in December, June, and September. Second, the Fed is still tightening but more patiently, with an expected funds midpoint of 4.12% in December, 4.39% in March, and 4.61% in June, before flattening near 4.65-4.70% later in 2027.
Third, the end-July coordinated US-Japan intervention, combined with persistently tougher official rhetoric since, has made the 160 area a zone of credible tail risk rather than just a psychological level. Fourth, Brent crude sits near $101, high but not accelerating the way it did last summer. A renewed shock would likely need a decisive break above the 109.97-110 area to revive the inflation-expectations channel that helped drive USD/JPY toward 164.
What could change the picture
The setup is conditional, not fixed. A fresh oil shock, a hawkish surprise from the Fed's tightening path, or a decisive USD/JPY break through the 159.73-160.38 resistance cluster could each revive the case for a move back toward 164. Until one of those triggers appears, the Nikkei's path to a fresh record looks clearer than USD/JPY's path back to its July peak.
Source: ActionForex
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