After 34 years, Japan’s major stock market index, Nikkei has surpassed its all-time high, exceeding the record level established during the nation’s late 1980s asset bubble.
The Nikkei 225 index, representing the largest Japanese corporations, closed above 39,000 for the first time ever on Thursday, surpassing its all-time record intraday high of 38,957 points during trade. One sales trader called the closing level of 39,098 the “psychological closure everyone wanted.”
The record capped a strong rally in 2024 fueled by increases in equities linked to chips. Whoops, applause, and standing ovations were reported by traders on dealing floors, throughout Tokyo.
Japan’s Benchmark Index Reclaims Past Glory
Takeo Kamai, head of execution services at CLSA, a Tokyo-based investment and capital market firm, stated that there was a moment of “euphoria and surprise” on his firm’s trading floor. He also mentioned that the impressive earnings reports from US chipmaker Nvidia overnight had undoubtedly been the driving force behind the last surge over the line.
During a press conference on his company’s Tokyo trading floor, Chief Executive Kentaro Okuda of Nomura (the largest investment bank and brokerage in Tokyo ) stated that Nvidia’s performance had given Tokyo investors a “sense of confidence” to enter the market.
On the last trading day of 1989, 15 Japanese companies were among the top 20 global companies in market capitalisation. These latest gains lifted the benchmark index above its 1989 closing level. It was a day when the index closed at 38,915.
Japanese Stocks Are Attracting Global Attention
The Nikkei has increased 17.5% since the year began, making it the top-performing major index globally as the declining value of the yen draws in international investors. A depreciating currency increases the earnings of export-oriented businesses, which account for a large portion of Tokyo stocks.
Due to China‘s faltering economy and geopolitical unrest, investors have also shifted their money from China’s markets to Japanese equities. The advances in Japan also coincide with a wave of domestic households investing as a result of a recently introduced government-subsidised savings program.
Investors Embrace Nikkei Amid Corporate Transformation
Tokyo traders have dubbed the 1989 peak the “iron coffin lid” because of its seeming un-achievability, which has come to represent the nation’s 35 years of economic stagnation.
Bruce Kirk, chief Japan equity strategist at Goldman Sachs, an American multinational investment bank and financial firm, stated that over the course of the last thirty-plus years, Japan has consistently been portrayed in connection to the Nikkei all-time high set in the December 1989 bubble. He also added that this narrative has consistently been tempered with an element of scepticism that references the high-water mark, regardless of how well it has performed since the market finally bottomed out.
After a strong advance this year, Japan’s broader Topix index, which is monitored more closely by professional fund managers, is likewise approaching its 1989 peak but has yet to reach a new high. The Topix closed 1.27 per cent higher on Thursday, and it is currently approximately 8.5 per cent below its all-time high.
Strategists of Bank of America predicted that the Topix would close the year at 2,850, not far from its record high of 2,884 points, while the Nikkei will close the year at 41,000.
The Nikkei is boosted by the spike in corporate profitability in Japan, which is a result of the 2009 reforms being successful. Analysts highlight increased efficiency and better balance sheets. Nevertheless, despite Uniqlo’s (a fashion company) (10.5%) smaller market capitalisation than Toyota, the index’s stock price-based weighting system provides some businesses excessive power. This peculiarity saw Uniqlo’s recent increase disproportionately impact the Nikkei.