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Japan's Nikkei 225 index eclipses record high after 34 years – Financial Times

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Japan’s main stock indexes have surpassed all-time highs for the first time in 34 years, surpassing record levels reached during the asset bubble of the late 1980s.

Japan’s largest Nikkei 225 index hit an intraday high of 38,957 points during trading on Thursday, closing above 39,000 points for the first time in history. One sales trader described his closing price level of 39,098 as “the psychological closing price that everyone was hoping for.”

The record capped off a strong bull run in 2024 driven by gains in chip stocks. Traders on trading floors across Tokyo reported standing ovations, cheers and cheers.

Takeo Kamai, head of execution services at CLSA in Tokyo, said there was an atmosphere of “euphoria and amazement” on the company’s trading floor, adding that the last spurt to cross the line was clearly a result of US chipmaker Nvidia’s He added that this was due to strong financial results on the night.

Nomura CEO Kentaro Okuda said in an impromptu press conference at the company’s Tokyo stock market that Nvidia’s financial results will allow Tokyo investors to enter the market with “confidence.” said.

The recent rally has pushed the benchmark index above its level on the last trading day of 1989. At that time, 15 Japanese companies were ranked among the top 20 companies in the world by market capitalization. The index ended the day at 38,915.

The Nikkei stock average has risen 17.5% since the start of the year, making it the world’s best-performing major index as the weaker yen attracts overseas investors. A weaker currency will boost the profits of export-oriented companies, which account for a large portion of the Tokyo stock market.

Japanese stocks have also seen an influx of money as investors leave the Chinese market due to the economic slowdown and geopolitical tensions.

The increase in profits in Japan is also due to an influx of investment by domestic households taking advantage of the government’s new subsidized savings scheme.

The peak achieved in 1989 is sometimes referred to as the “iron coffin lid” by Tokyo traders, and its apparent unattainability is the result of 35 years of economic stagnation following the bursting of Japan’s stock and real estate bubble. It has become a symbol of

“For Japan, this is a very important barrier that we’ve finally broken through,” said Bruce Kirk, chief Japanese equity strategist at Goldman Sachs.

Money flowed into Japanese stocks as investors left the Chinese market. © Kazunari Kato/Reuters

“Over the past 30 years, Japan has been persistently framed in relation to the bubble-era Nikkei peak of December 1989,” Kirk added. “No matter how well the market has fared since it finally bottomed out, the story has always been tempered by an element of skepticism that refers to the high water mark.”

Japan’s broader Topix index, which is more closely followed by professional fund managers, is also approaching its 1989 high after a strong rally this year, but has yet to break any new highs. On Thursday, the TOPIX ended 1.27% higher and is now up about 8.5% from its all-time high.

Bank of America strategists currently expect the Nikkei Stock Average to end the year at 41,000 yen, while the TOPIX will reach 2,850 points, just shy of its all-time high of 2,884 points.

Koji Toda, a fund manager at Resona Asset, said, “There is great uncertainty and a sense of overpricing among Japanese investors, but we cannot afford to be left behind, so we have no choice but to get on with it.” . management.

Since the Nikkei Stock Average bottomed out in 2009, a decade and a half of governance reforms have begun to bear fruit, providing an added boost to Japanese corporate profits, which have nearly tripled since the bubble era.

“That kind of thing is [companies] “They started doing the right things, like improving their balance sheet and operating margins, and they’ve continued to do the right things since then,” said Pelham Smithers, a veteran Japanese stock analyst. “And other areas that we needed to get right, like improving asset efficiency, are starting to get right.”

The Nikkei Stock Average has long been a favorite market benchmark for Japanese retail investors, many of whom bet heavily on its movements through leveraged day trading. However, because the weighting is calculated based on stock price rather than market value, some companies have a very large presence.

Uniqlo’s parent company, Fast Retailing, has by far the largest weight in the Nikkei Stock Average at 10.5%, even though its market capitalization is half that of Toyota. The stock rose more than 2% at one point on Thursday.

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