Historic Milestone
Japan’s Nikkei 225 index reached a historic milestone on Thursday by surpassing the all-time high set just before the catastrophic burst of the country’s asset bubble in the early 1990s. The blue-chip stocks index peaked at 39,156.97, beating the December 29, 1989 record of 38,957.44, before closing at 39,098.68 points, marking its highest closing level.
This breakthrough signals a return to the levels seen during Japan’s economic boom from 1985 to 1989, characterized by a quadrupling in the value of the Nikkei and soaring Japanese assets.
During this era, Tokyo property prices skyrocketed, golf club memberships cost millions of dollars, and Japanese companies, fueled by a strong yen, embarked on an overseas acquisition spree. The crash in the early 1990s led to Japan’s “lost decades” of economic stagnation, deflation, and rising national debt.
The recent resurgence in the Japanese stock market began around 2013, gaining momentum in the past few years with a 28% growth in 2023 and approximately 17% so far in the current year. The market received a boost on Thursday with US chipmaker Nvidia’s strong results.
Japan’s stock market recovery is attributed, in part, to the Bank of Japan’s commitment to sub-zero interest rates, keeping the yen weak. Analysts emphasize that stock prices, when compared to the “bubble” years, are not overly expensive.
However, potential risks include lower-than-expected salary increases, a shift in the Bank of Japan’s monetary policy, and uncertainties regarding US interest rates. Despite these concerns, Japan has once again become Asia’s most valuable stock market in dollar terms, overtaking Shanghai in January.
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