The Nikkei Stock Index marked a historic Monday when it breached the 40,000 mark, reaching an all-time high of 40,109.23. This milestone follows another zenith just the previous week when the index hit a high unseen for 34 years. Amidst this remarkable performance, technology stocks have been standout performers.
The Topix index, however, closed a tad lower at 2,706.28, down by 3.14 points or 0.12 percent. Notably, since its 1989 peak, the Nikkei has gained over 1,000 points due to strong corporate profits and attractive interest rates. The Japanese yen remained steady against the dollar, boosted by investors’ confidence in the strengthening Japanese economy.
Future projections for Japan’s financial markets are positive and modest, fuelled by the slow but sure economic recovery and nationwide vaccination progress. A recent boost in consumer spending shows public confidence starting to grow, bouncing back notably from the initial hit brought by the pandemic.
The Bank of Japan’s ongoing monetary easing stirs some unease amidst global inflation worries.
Policymakers and investors are keeping a keen eye on this, anticipating its potential impacts on Japan’s economic map. Precision instrument and mining stocks witnessed the greatest gains on the Prime Market, while marine transportation and rubber product stocks bore the steepest falls.
Steel and real estate stocks stumbled, while tech stocks such as Tokyo Electron and Advantest soared, mirroring growth trends in the U.S. Despite falling sectors, the Topix index remained strong and steady, just above the 2,000-point line. Fluctuating performances in banking and insurance stocks reflected global macroeconomic uncertainties, while pharmaceuticals took a hit due to a lack of significant news.
Seiichi Suzuki, an analyst at the Tokai Tokyo Research Institute, attributed high-performing tech stocks and optimism about global recovery as significant factors for the boost in market confidence. He highlighted the shifting trends towards value stocks and cyclical sectors and noted that political developments and policy changes heavily influence these trends.
While these growth prospects are promising, the swift ascent’s sustainability is uncertain, given the market’s boom-and-bust history. A rapid rebound is attributed to aggressive monetary easing and extensive government stimulus measures. However, underperforming consumer price inflation and slow-paced structural reforms, compounded by an aging population, pose significant challenges for long-term growth.
Lastly, the recent surge in stock projections is credited to the Bank of Japan’s “Abenomics” economic stimulus program. Concurrently, the U.S. dollar saw a minor decline while the 10-year Japanese government bond yield dropped 0.005 percentage points. Oil prices hit a two-year high amid growing demand, and gold experienced a surge, propelling investors towards safer assets.
