[4-Layer Analysis] Viewing the Japanese Stock Market: A Perspective That Reveals the Next Move for Future Investment Decisions

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When the Prime Minister and Cabinet members are reshuffled, I feel such a difference in how the world and domestic situation appear. I also wrote an article summarizing overseas coverage, but what's particularly concerning when watching overseas news on YouTube is the reporting by Western media. I realized that biased reporting isn't just a Japanese phenomenon—it's worldwide. This is probably because they don't actually conduct interviews and their information sources are biased.

In this era where politicians and political parties can directly deliver unfiltered primary information to viewers through the internet, citizens and internet users are beginning to realize that secondary media outlets that distribute processed information exist in the same category as superficially high-quality but biased internet clip compilations and summary article sites—yet the media seems oblivious to this awareness.

This shows how far the democratization of information has progressed.

Now, in this article, I've focused on the Nikkei Average and conducted a 4-layer analysis of the Japanese stock market. This involves analyzing through four layers—Market, Policy, Trade, and Geopolitics—offering a new comprehensive analytical approach different from typical economic articles.

Even after following news and social media, you often wonder: "So what does this all mean? Is now a buying opportunity? What will happen to Japanese and US stocks? What about the economy?"—There's so much similar information distributed online, but does seeing it really help?

This article resolves that confusion by organizing various data to reveal the next move.

🇯🇵 Nikkei Average & TOPIX Four-Layer Analysis (as of October 22, 2025)

🔹 Summary Overview

This is a four-layer (Market, Policy, Trade, Geopolitics) analysis report on the Nikkei 225 and TOPIX, constructed based on data and two images (stock price comparison charts and Nikkei 225 heatmap). Structurally, each layer is positioned using Z-score-like relative evaluation (converted to 0-100 scale), organizing factor-specific contributions and sensitivities.

🧩 Layer 1: Market Layer

Situation Assessment (Z-score conversion: +1.8σ / Index scale ≈ 78/100)

• Stock Price Momentum: Nikkei +48.7%, TOPIX +37%, surpassing major developed country indices. Since August, cyclical rises in both "growth + value" have been notable.

• Volatility Trends: Nikkei VI (29.45) down 2% from previous day; market risk premium declining. VIX also stable in the 17 range.

• Market Breadth: 170 stocks up / 54 down / 1 unchanged. Upside ratio over 75% indicates healthy upward diffusion.

• Sector Contributions:

  • Leading: Shipbuilding (+6.9%), Construction (+3.4%), Textiles (+3.0%), Automobiles (+2.6%)

  • Suppressing: Telecommunications (SoftBank Group -4.9%) as a drag

  • Cyclical sectors are leading, with a leadership shift from defensive to economically sensitive sectors progressing.

Interpretation: The market is clearly in "risk-on" mode. Short-term overextension territory, but volatility decline provides buying support.

🏛️ Layer 2: Policy Layer

Situation Assessment (Z-score conversion: +0.9σ / Index scale ≈ 65/100)

• Monetary Policy: US 10-year bond yield at 3.963% (▲0.023pt), settled and continuing to support risk assets. In Japan, the BOJ maintains accommodative stance even after YCC removal, with liquidity effects persisting.

• Exchange Rate (USDJPY 151.76): Yen weakness locked in, boosting corporate earnings (tailwind for export-led stocks). However, risk of verbal intervention by policy authorities exists.

• Financial Conditions Index (FCI estimated): Slightly accommodative direction (FCI ≈ -0.3σ).

Interpretation: Policy layer maintains "stable accommodative bias." Exchange rate level supports export stocks while inflationary pressure remains limited.

🌐 Layer 3: Trade (Trade & Supply Chain Layer)

✅ Situation Assessment (Z-score conversion: +1.2σ / Index scale ≈ 70/100)

• Export-led Stock Gains: Automobiles (+2.6%), Machinery (+1.9%), Precision Instruments (+1.5%), showing significant external demand contribution in yen-weak environment.

• Supply Chain Pressure: NY Fed GSCPI indicator remains low and stable year-over-year (supply stability).

• Shipping/Shipbuilding gains (+6-7%) reflect rising freight rate expectations due to Red Sea/Suez route delay concerns and Panama Canal water level restrictions.

Interpretation: Trade layer is solid with both strong external demand and yen-weakening effects. Global logistics bottleneck concerns contribute positively in the short term.

⚔️ Layer 4: Geopolitics Layer

⚠️ Situation Assessment (Z-score conversion: -0.3σ / Index scale ≈ 45/100)

• Geopolitical Risk Index (GPR) remains somewhat elevated, but market reaction is limited.

• Oil/Energy Markets: Brent stable near $88. Middle East/Red Sea route tensions continue but feel hedged.

• Election/Diplomatic Events: US presidential primaries being watched, but limited direct spillover to Japanese stocks.

• Defense/Energy-related stocks show limited reaction (defense flat, oil sector small rebound).

Interpretation: Geopolitical risk is being priced in as "manageable uncertainty" and not hindering risk-on sentiment.

🔄 Cross-Layer Impulse Analysis (Sensitivity Chain)

→ Net Impact: Geopolitical friction is temporarily boosting Trade, consequently supporting Market. → Volatility transmission (FEVD conversion): About 15-20% of Market fluctuation stems from Trade factors.

Analysis Points:

• Market Shock (orange line): Strongest short-term reaction (initial effect +0.8σ). Decays in 3-4 weeks. Typical market volatility chain type.

• Policy Shock (yellow line): Maintains gradual upward effect (initial +0.5σ) for about 12 weeks. BOJ's accommodative stance supports stock prices through risk premium reduction.

• Trade Shock (red line): External demand shock +0.6σ short-term, with cyclical re-rise (around week 14). Reflects logistics/FX/energy price linkage.

• Geopolitics Shock (pink line): Initial stage -0.3σ downward pressure. Gradually recovers after week 6, impact approaches zero after week 14. Suggests transient nature of risk-off reaction.

🧩 Conclusion: 4-Layer Integrated Score

Most sustainable effect: Policy shock Trade shock: Rhythmic (real economy pathway) Geopolitical shock: Short-term negative, long-term neutral structure

#Investment #AssetManagement #WealthBuilding #RegularInvestment #Nikkei #TOPIX #SP500 #Nasdaq #Dow #NoteMoney

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