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Kazuhiro Nogi/AFP/Getty Images
Pedestrians watching a rise in the stock value of Japan’s Nikkei 225 in Tokyo on February 22, 2024.
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Japan’s stock market has finally set a new record for the first time since 1989, when an asset price bubble burst, ushering in decades of economic stagnation.
Strong gains in Japanese semiconductor stocks following Nvidia’s blockbuster earnings report on Wednesday night helped lift the Nikkei index 2.2% to close at 39,098.68 points on Thursday, surpassing its previous all-time high of 29 December 1989.
But the index has been rising for more than a year, boosted by a combination of stronger corporate earnings, a weaker yen that helps exporters and an influx of foreign investors seeking an alternative to China’s depressed markets.
The Nikkei gained 28% in 2023, making it the best performer in Asia. So far this year, it has increased more than 17%, putting it ahead of other major global indices.
“This is a moment to reflect on investors’ recognition that a true (durable) bull market has been underway in Japan for some time and is likely to deliver further gains in the future,” Morgan Stanley strategists wrote in a note. investigation on Thursday.
One specific reason because the optimism is strong corporate profits, they said.
Daniel Hurley, portfolio specialist in Japanese and emerging market stocks at T. Rowe Price, said the rally was mainly due to strong earnings, a weak yen and corporate governance reforms.
The yen has fallen more than 6% against the US dollar so far this year, after losing around 8% against the dollar in 2023. A weaker currency benefits Japanese exporters and makes shares of the country’s companies cheaper. for foreign investors.
Japanese tech companies also have bright prospects as demand for AI soars, Hurley added.
Japanese semiconductor stocks rose on Thursday. after Nvidia (NVDA) said its quarterly profits soared 769% compared to a year ago. That fueled a surge in Nvidia shares in aftermarket trading.
Semiconductor maker Screen Holdings soared 10.2%. He was the best performer among Nikkei voters. Advantest, which supplies test equipment to the chip industry, rose 7.5%. Tokyo Electron, which sells electronics and semiconductor production equipment, rose 6%.
For the country to maintain this rebound, Japan will have to deepen its “corporate governance reforms, which will further boost shareholder returns,” Hurley said.
The Japanese government has implemented corporate governance reforms since 2013, aiming to make companies more accountable to their shareholders and promote their sustainable growth.
Foreign capital inflows have also supported the rebound, Hurley added.
According to recent estimates by Goldman Sachs, Japan’s equity funds have witnessed a cumulative inflow of $5.1 billion so far in 2024. Last year, they recorded an inflow of $7.4 billion.
Last June, billionaire investor Warren Buffett’s Berkshire Hathaway added to your holdings in the five largest trading houses in Japan.
This story has been updated with additional information and context.