Japanese stocks rally to their highest level since the 1990s “bubble era”
Head of Investment Research
Japan’s broad-based index “Tokyo Price Index”, also known as “Topix” (made up of about 2,000 stocks) added 0.6% this morning, hitting its highest point since August 1990, the country's so-called "bubble" era.
Topix has gained more than 6% in 2023 so far led by utilities, consumer cyclical, technology, and financials, while well-known tech giants companies such as Nintendo, Sony, Softbank Group, and Tokyo Electron were among the top gainers.
Adding to that, the other major index Nikkei 225 hit an intraday high of 30,924 points on Friday morning after a 1% gain, posting its highest since November 2021 led by industrial names including NSK, Mitsubishi Materials, and Nippon Sheet Glass.
By surpassing the key 30,000 psychological level for the first time in 20 months on Wednesday morning, Nikkei 225 index has boosted its recent bullish momentum while attracting more trend-focused traders and momentum speculators.
Nikkei 225 index, Daily chart
The broad-based rally in the Japanese stocks has been driven by resilient economic fundamentals, strong corporate earnings, solid domestic demand (despite the global turmoil), zero-interest rates, and the global risk-on mood following the optimism over a U.S. debt ceiling deal.
Nikkei 225 index has gained nearly 15% since March lows (after the turmoil in the U.S. banking sector), and 20% in 2023 so far, as foreign and domestic investors fled to Japan’s stocks for protection or a portfolio hedge against the growing risk of a global recession and geopolitical concerns.
The softening Yen, which hit a six-month low of ¥138 against the dollar this morning on dovish BoJ, also gives big support to the export-oriented Japanese economy, making domestic products less expensive for buyers with foreign currencies.
Overall, the stronger corporate earnings together with the supportive ultra-loose monetary policy by the Bank of Japan boost Topix’s and Nikkei’s bullish and safe-haven appeal and add steam to the recent stock market rally.
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