Japan’s Nikkei 225 Stock Average surged past the significant milestone of 40,000 for the first time, underscoring the momentum of its historic rally. The blue-chip index reached a fresh intraday record of 40,314.64, with tech shares, including Advantest Corp., leading the charge.
This surge was propelled by a surge in domestic investors joining global funds, which have been the primary drivers of the rally. The influx of investors was so significant that Japan’s largest online broker, SBI Securities Co., experienced temporary crashes in its stock-trading app due to the overwhelming volume of customers attempting to log in.
According to Charu Chanana, a strategist at Saxo Capital Markets based in Singapore, the Nikkei 225’s breach of the 40,000 mark represents a crucial psychological level. While it could introduce some resistance and volatility, structural factors favoring the market and the weakening yen suggest a bullish sentiment rather than concerns of overvaluation.
Despite this milestone, the broader Topix index fluctuated between marginal gains and losses, still trailing about 6% below its record set over three decades ago before Japan’s asset-price bubble burst.
The Nikkei’s resurgence to its 1989 peak reflects growing confidence among investors in Japan’s corporate sector, driven by improving shareholder returns, currency depreciation, and robust corporate profits. Warren Buffett’s endorsement of Japanese trading houses and global funds’ shift into Japanese equities further buoyed market sentiment.
While concerns about overheating persist, fueled by the rapid pace of the rally, many investors remain optimistic about Japanese stocks’ prospects. Major asset managers like BlackRock Inc. and Amundi Asset Management anticipate sustained earnings growth and improvements in corporate governance to support the market’s strength.
Moreover, encouraging signs of economic recovery, including rising capital spending and the potential end of deflation, underscore the fundamental support for Japan’s market rally. Despite challenges, such as the pace of growth outstripping economic performance, analysts like Masahiro Yamaguchi of SMBC Trust & Banking Ltd. emphasize the underlying health of Japan’s economy and its positive correlation with the US market.
