June 26th 2026
EIDE Briefings
-Russia-Ukraine war and the continuing surge of Nikkei 225
For japan, Ukraine issue is farther than Iran war.
Thus both risk-on and risk-off mode works supportively for Tokyo.
At a risk-off market, Tokyo is a safe-heaven.
Risk-on mode benefits Tokyo market through New York.
Attacks on Russian oil refineries in Ukraine are intensifying.
Given their proximity to Moscow, the political impact is significant.
Russia’s economy is deteriorating due to ballooning military expenditure and sanctions.
The VAT rate has also just been raised to 22 per cent.
Although inflation has stabilised to some extent thanks to the central bank’s high-interest-rate policy, petrol prices are likely to rise sharply.
Russia’s Economic Problems 2026
https://www.bloomberg.com/news/articles/2026-02-13/russia-poised-to-pause-rate-cuts-amid-growing-inflation-risk
Caught between a rock and a hard place, the Russian Central Bank has once again limited itself to a modest interest rate cut.
It is likely that domestic discontent will grow as the economic situation for the population worsens.
Putin may step up provocations against Europe to divert public attention.
Should this occur, downward pressure is likely to be placed on European financial markets.
The euro looks set to weaken against the dollar.
However, as a rule of thumb, Europe is likely to strengthen its unity and step up support for Ukraine, putting Russia on the back foot.
That said, it is inconceivable that Russia would surrender of its own accord to save face.
It has not delivered any military victories to its people, and for Putin, this is a matter of sovereignty.
Furthermore, China, which faces the Taiwan issue, does not wish to see Russia surrender.
It is likely that ceasefire negotiations will be initiated under China’s leadership.
Japanese equities stand to benefit.
The country enjoys a high degree of political stability and is accelerating investment in the high-tech sector.
Furthermore, it is not directly exposed to geopolitical risks.
As the Nikkei 225 is dominated by semiconductor stocks, volatility is likely to remain high, but the index is expected to rise.
Moreover, the strength of Japanese equities means they serve as a safe haven during risk-off periods and will also benefit from a return to risk-on sentiment following a ceasefire in Ukraine.
https://www.semafor.com/article/02/25/2026/japan-stocks-hit-record-high-despite-china-trade-row
https://japannews.yomiuri.co.jp/politics/politics-government/20260420-323199/