US-Iran deal, BoJ decision and oil slide drive Nikkei

Japanese equities rose sharply after the United States and Iran reached an agreement, sending the Nikkei 225 to a record 69,593 and the Topix to 4,023. West Texas Intermediate crude moved toward $80 and Brent has fallen more than 30% from its peak earlier this year.

The deal between Washington and Tehran ended direct hostilities and reopened the Strait of Hormuz, prompting risk-on buying in Tokyo. Market participants cited the reduced risk to Middle East oil flows as a key factor behind early gains.

Lower crude prices cut the value of oil imports for Japan. Officials have said the government will increase crude shipments to refill strategic reserves after earlier disruptions to Gulf supplies.

The Bank of Japan meets on Tuesday. The yen was trading around 160 per U.S. dollar, a level that previously led the central bank to inject more than $30 billion into markets. Many market analysts expect the BoJ to raise its policy rate by 25 basis points to 1.0%, which would be the highest rate in over 30 years, though some see a chance the bank could pause given recent energy-price moves and geopolitical uncertainty.

Japan’s 10-year government bond yield has climbed in recent months and peaked near 2.80%. Traders say bond yields and currency moves will be watched closely around the BoJ decision.

The U.S. Federal Reserve is set to announce its decision a day after the BoJ meeting. Economists broadly expect the Fed to hold policy rates steady. U.S. data showed the economy added about 172,000 jobs in May, with headline consumer inflation near 4.2% and producer inflation around 6.5%.

Tokyo will publish May trade figures on Wednesday, with forecasters expecting exports to rise about 16% and imports to increase roughly 12%. Japan’s consumer price readings for May are due on Friday, with economists projecting headline inflation of about 1.6% and a core rate near 1.9%.

Investors said they will monitor central bank commentary, currency moves and bond yields for signals that could influence equity valuations in the days ahead.