The Japanese Stock Market Hits Highs Not Seen for Three Decades — Will It Last?
Key takeaways
- Tokyo Price Index was up to the highest levels seen since July 1990 on Monday
- Nikkei has gained 20% since the start of the year
- Perfect storm has led to investors piling in on the upside, with analysts predicting it’s set to continue for the long term
Everyone knows the Japanese economy has been on the rocks as it’s battled a number of factors which have led to basically no growth since the 1990s. But that’s all changing, with the Japanese economy hitting fresh highs and looking to break free from the stagnation it’s been trapped in. Let’s get into the details and whether you should be interested in Japan’s change in fortunes.
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What happened with the Japanese stock market?
On Monday the Tokyo Price Index hit its highest level since 1990, having already gained 14% this year, while the Nikkei 225 has seen a 20% boost in the same period.
It’s an exciting time for investors as the country’s stock market has seen a thirty-year slump that it’s only recently emerged from. The 1980s global stock market crash led to a prolonged period of deflation in Japan, with its aging population leading to higher spends on healthcare and a reduced workforce. In short, Japan’s stock market and economy has been stuck for a while.
So why is it picking up now? It’s been the perfect storm for the Japanese stock market, which has seen a weakening Japanese yen against inflation hitting a four-decade high. Japan also recently introduced new corporate governance rules, which were aimed at boosting shareholder returns, which has made the market more attractive. News of the US debt-ceiling crisis reaching an agreement led to the fresh highs seen on Monday.
Will the stock market rally last?
By all accounts, there’s no reason for the rally to slow down anytime soon — especially as more investors pile in to catch the upside. The Bank of America has the Topix pegged for a 7% lift by the end of the year and for the Nikkei to climb another 4%. Meanwhile, Goldman Sachs has predicted the Topix will gain a further 3% in the next year.
The Japanese stock market rally is a great example of why you should diversify your investments across different markets. Having exposure to a wide range of global markets, industries and assets means you can not only protect against falls but also benefit from unexpected gains, like the Japanese market has seen. (Plus, you can use AI to help you work out when the upside might be.)
The bottom line
The Japanese stock market is finally seeing the light after some heavy stagnation and investors are keen to see further returns from this newly emerging market. It’s possible the Topix and Nikkei could reach the heady highs of the late 1980s and early 1990s once more, so doing some research on the best investments (or letting AI do it for you) could generate some nice returns.
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