Nikkei Plunges! What’s Next and How Beginners Can Navigate This Market?

Nikkei225 Daily Chart

On February 3, 2025, the Nikkei 225 dropped significantly by 1,052.40 points (-2.66%) to close at 38,520.09. This decline was driven by heightened concerns over Trump’s tariff policies, which dampened investor sentiment. Export-related stocks and domestic demand sectors faced widespread selling, resulting in all 32 sectors on the Tokyo Stock Exchange posting losses, except for the information and communication sector. The total trading volume on the TSE Prime Market reached 5.56 trillion yen, highlighting the market’s overall bearish sentiment.

Future Outlook and Predictions

1. Technical Analysis of Nikkei 225
   The attached daily chart shows the Nikkei 225 recently breaking below its moving average, signaling a correction phase. The 38,000 level serves as a psychological support line, but a clear break below this level could lead to further declines towards 36,000.
2. Impact of Trump’s Tariff Policies
   With tariffs on exports taking effect, export-dependent sectors such as automobiles and precision machinery are under significant pressure. While these sectors face short-term challenges, domestic demand-driven industries may recover sooner as external risks subside.
3. Investor Sentiment and External Factors
   The bearish sentiment in the U.S. market has spilled over into Japan, exacerbating short-term volatility. However, the easing of global inflation and stabilization of central bank policies may support a medium-term recovery.
4. Possible Scenarios
   In the short term, the Nikkei 225 is likely to hover around the 38,000 support level with heightened volatility. If geopolitical risks ease and Trump’s policies stabilize, the market could regain its upward trajectory in the mid-to-long term.

Explanation for Beginners

With the Nikkei 225 experiencing a significant drop, many beginners may be wondering, “Is this the right time to start investing?” While market volatility can feel daunting, it also presents a great opportunity for those who act wisely. Below are specific and actionable steps for beginners to take advantage of the current market conditions confidently.

✅ What should you do?

1. Start Small with Gradual Investments
   The Nikkei 225 is currently testing the psychological support level of 38,000. Begin with small investments using the “dollar-cost averaging” method, which spreads your investment over time. This approach reduces the impact of market volatility and helps lower your average purchase price if prices fall further.
2. Diversify Across Sectors
   Export-related stocks (e.g., automobiles and precision machinery) are currently weaker, while domestic demand sectors (e.g., food, communication) are relatively stable. Spread your investments across multiple industries to mitigate risks effectively.
3. Monitor News and Charts Daily
   The market is highly responsive to Trump’s tariff policies and the U.S. market. Make it a habit to follow relevant news and review price charts regularly to identify optimal entry and exit points.
4. Adopt a Mid-to-Long-Term Perspective
   Don’t be swayed by short-term market volatility. Focus on building wealth over the long term. Consider using index funds or ETFs, which provide built-in diversification and are beginner-friendly.
5. Gain Experience Through Small “Trial Investments”
   Instead of starting with a large amount, try small investments to gain firsthand experience with market behavior. This hands-on approach helps you better understand market dynamics and build confidence gradually.

By starting small and staying informed, beginners can navigate the market safely while laying a solid foundation for long-term investment success. Take the first step today!