Japan’s Nikkei 225 reached a new high on Thursday, driven by consumer, banking, and electronics sectors. This year’s explosive rise in Japanese equities has been fueled by strong results and policies that are favorable to investors.
The Nikkei 225 broke the previous record high of 38,915.87 set in 1989 by jumping over 2% to 39,029 today.
In the Asia-Pacific region, the Nikkei and the larger Topix have both performed very well. They are up more than 10% so far this year after rising more than 25% in 2023, which was their respective highest annual gains in at least ten years.
The strong corporate results reported by Japan Inc. in the third quarter has led Bank of America equity analysts to raise their 2024 year-end projections for the Nikkei 225 from 38,500 to 41,000. They increased their Topix projections from 2,715 to 2,850.
A lower yen, which has lost almost 6% of its value against the dollar so far this year and is headed for a decline to 33-year lows seen late last year, has also helped to fuel the surge.
Following Warren Buffet’s positive predictions about Japan, investors have been flooding the market with cash for Japanese stocks, applauding the government of Japan for pushing for further corporate governance measures that should force Japan Inc. to increase shareholder returns.
Foreign investors made more than 2 trillion yen in January investments in the Tokyo Stock Exchange’s “prime” offerings, which are its biggest and most liquid equities, according to exchange data.
According to a Nikkei estimate published last week, net income of Japanese listed businesses for the fiscal year that ends in March 2024 may set a record for the third year in a row.
This follows record quarterly profits for the October–December quarter, which Goldman Sachs analysts report are 14% higher than consensus projections and up 45% from the same time last year.
The biggest automaker in the world, Toyota, upgraded its profits projection, citing more sales and a larger profit margin, along with a number of other Japanese businesses.
Yen weak, stocks rising
The recent upswing in the stock markets has occurred against the background of the Japanese yen’s decline, which peaked at 150.40 versus the US dollar. This decline is mostly due to the discrepancy between the ultra-easy policies of Japan and the high interest rates in the US.
Shunichi Suzuki, the finance minister of Japan, was the most recent of numerous government representatives to express his worry over the declining value of the yen on Friday. According to reports, he was keeping a close eye on the currency’s movements.
The persistent depreciation of the yen has helped some Japanese exporters, but it has also reduced Japanese consumers’ buying power.
Nevertheless, the Bank of Japan has kept the last negative rate system in history in place even though “core core inflation,” which does not include the cost of food and energy, has been over its 2% objective for more than a year.
Market players anticipate that, after confirmation of a pattern of significant pay rises by the annual spring salary talks, the BOJ would abandon its zero rates regime at its policy meeting in April.
Wage increases, according to the central bank, would result in a more significant spiral that would stimulate consumer spending.
However, sustained high rates of inflation have negatively impacted domestic consumption, which is a major factor in Japan’s GDP contraction for the second consecutive quarter, surprising economists who had anticipated a little rise in the country’s GDP. It also meant that Germany became the world’s third-largest economy, replacing Japan.
NEWS COLLECTED: NBC NEWS
