FX.co ★ Japanese Shares Follow Wall Street Higher

The Nikkei 225 Index climbed 1.7% to above 69,400 on Friday, while the broader Topix Index advanced 0.5% to 4,196, as Japanese equities extended their rally. The move followed strong gains on Wall Street after softer US inflation data led traders to scale back expectations for a Federal Reserve rate hike in September. Markets are now pricing in roughly a 35% probability of a 25-basis-point Fed hike at that meeting, down from about 55% a week earlier.

On the domestic front, investors are increasingly speculating that the Bank of Japan could raise interest rates in September or October, amid concerns that a weaker yen may intensify inflationary pressures. Technology shares led the market higher, with notable gains in Kioxia Holdings (5.2%), Advantest (5.1%) and SoftBank Group (5.5%). For the week, the Nikkei and Topix are on course to gain about 6% and 3.5%, respectively.