Nikkei 225 Forecast: Can Foreign Inflows and AI Stocks Drive a Breakout Above 60,000?

Japanese stocks received strong inflow of foreign purchases in April, boosted by the high demand for AI stocks. The foreign investors purchased a net 2.38 trillion yen of Japanese stocks, after making an even higher purchase of 3.94 trillion yen the previous week. That demonstrates the increased exposure of global investors to Japan when market confidence is rising.

The surge in the large technology stocks also contributed to the rally in the Nikkei 225. Additional support came with the fact that Trump extended the Iran ceasefire indefinitely which minimized the immediate geopolitical fear and prompted investors to re-enter risk assets.

Foreign Inflows and AI Stocks Lift the Nikkei 225

This move was primarily caused by the inflow of foreign money back into Japanese equities. Two consecutive weeks of extremely high inflows indicate this was not a short-term trading. It indicates an increased trust in the equity market of Japan, particularly in technology and artificial intelligence sectors. SoftBank leaped over 19% last week and Advantest surged over 11%.

These constitute key players within the AI and semiconductor theme and their high performance enhanced the mood within the overall market. These massive holdings contributed to driving the Nikkei higher and reinforced the perception that Japan is one of the most important markets in the world in terms of AI-driven equity growth.

The extension of the ceasefire was also significant but the uncertainty still persists in the global markets. Lower fears about the Middle East enhanced the global risk appetite and reduced the need for defensive positioning. That made investors concentrate more on growth opportunities and Japanese stocks were the beneficiary of that change.

Meanwhile, foreign investors sold 298.2 billion yen of Japanese long term bonds, which indicates that they were more inclined to hold equities than less risky fixed income securities. This rotation indicates that investors are now more optimistic about the prospects of stocks as compared to bonds. The Japanese investors continued to purchase foreign stocks which suggests high confidence in equities at home and abroad.

Nikkei 225 Consolidates Below Breakout Zone

From a technical perspective, the long-term price action remains strongly bullish, as seen in the monthly chart below. The index broke from the ascending broadening wedge pattern in September 2025 and hit 60,000 in February.

After a strong correction in March 2026 on the fears of U.S.-Iran war, the price corrected lower back towards 50,000. However, the prospect of a ceasefire and peaceful optimism pushed the index to 60,000 in April.

This rebound has produced a strong consolidation zone between 50,000 and 60,000. Therefore, the next move depends on a breakout from any of these levels. Based on the strong bullish price action during the past few months, the breakout above 60,000 is still likely. However, any correction back towards 50,000 will offer a strong buying opportunity for long-term investors. The V-shaped recovery above 50,000 supports the bullish view.

The RSI remains extremely overbought, but the correction in March has pushed the RSI back to 70.

The 4-hour chart for Nikkei 225 shows the price consolidation zone between 58,300 and 60,000. This consolidation indicates bullish price action at the resistance level. But the break above 60,000 will only confirm this bullish price action.

Until the index breaks above 60,000, there is still potential for a correction back towards the 55,000 to 56,000 level, which would offer buying signals in AI stocks.

Bottom Line

Nikkei 225 presents strong foreign inflows, an increase in demand for AI stocks and the improvement of the risk sentiment that keeps investors focused on growth opportunities. The move towards equities as opposed to bonds indicates that there is confidence in the world despite some degree of uncertainty across the globe. The technical structure remains bullish with the index in a good consolidation zone following a strong rebound. A break above 60,000 will likely set the next leg higher whereas any drop back to 50,000-56,000 will probably bring in new buyers.