The Japanese stock market has once again entered the "overbought" zone. The last time this happened was in September last year, and the Japanese stock market subsequently fell by 9%.

The Japanese stock market is getting closer to its highest point since 1989, but there are signs of selling pressure on the technical front.

Recently, the relative strength index (RSI) of the Nikkei Stock Average reached its highest level since May last year. This technical indicator suggests that the Nikkei has entered the "overbought" zone, implying that a wave of selling could occur at any time. The last time this indicator crossed the "overbought" threshold was in September last year, and the market subsequently fell by about 9%. Some market observers believe that the Japanese stock market may face price volatility risks due to crowded trading.

Strategists from HSBC and Societe Generale believe that the Japanese stock market has risen too much and investors should start taking profits. They also point out that the volatility of the yen is another concern. The weakness of the yen is driven by Japan's negative interest rate policy, and as speculation grows about the Bank of Japan ending this policy this year, traders are also affected.

HSBC's Asian stock strategy director, Herald van der Linde, was quoted by the media as saying, "I would be cautious in this market." He said, "Everyone has bought a lot of Japanese stocks, everyone is optimistic about Japan, but most of the good news has already been priced in." It is worth mentioning that HSBC has a "sell" rating on the Japanese stock market.

HSBC predicts that the Nikkei Stock Average will end the year at 2460 points, a 1.3% decline from the current level. Societe Generale expects the Nikkei 225 index to fall to 32500 points by the end of June, a decrease of about 8%.

Michael Dyer, Director of Multi-Asset Strategy Investments at M&G Investments in Hong Kong, said:

"The short-term prices of many important stock targets have already been fully digested. We have relaxed a bit. We have made some profits, and taking profits seems to be increasingly becoming a consensus trade."

His view is supported by Kelvin Leung, Portfolio Manager at Robeco Hong Kong. Leung said:

"In my opinion, the recent rise is still driven by momentum indicators and is quite overheated. If you look at the breadth of the market, you will find that it is driven by large-cap stocks, technology stocks, and automotive stocks. I would say the market is still quite narrow."