The CSOP Double Short Nikkei 225 ETF (07515) is currently trading more than 4% higher. At the time of writing, it has gained 4.02%, reaching HK$14.24, with a trading turnover of HK$6.4231 million.

On the news front, the recent escalation of tensions in the Middle East has once again pushed international oil prices higher. As Japan is heavily reliant on energy imports, the market anticipates that rising oil prices will widen the country's trade deficit. Consequently, the Japanese yen has breached the 163 level against the US dollar, hitting its lowest point since December 1986.

Analysis indicates that the combination of a weaker yen, higher energy costs, and the pass-through of corporate expenses is fueling expectations of further inflation. Markets now anticipate that the Bank of Japan may raise interest rates again before December.

According to reports, a chief economist from a Chinese fund management firm believes that oil price changes remain a critical variable influencing the Japanese stock market. If crude prices continue to stay at elevated levels, Japan's AI and semiconductor sectors could face dual pressures from rising costs on one side and compressed valuations on the other. Additionally, increased expenses for electricity, logistics, and raw materials may erode profits for some companies. However, the growth in global AI demand, coupled with export benefits from a weak yen, could provide some offsetting effects.