Japan’s Nikkei Stock Average Reaches All-Time High
The Nikkei 225 has continued its exceptional rise to a new all-time high, representing a sign of the country’s resurgence in the global market. The new record, established on Thursday, saw the indicator closing at 39,098.68 points, surpassing the previous maximum reached in December 1989.
This impressive feat marks the end of a 34-year roller coaster ride for Japanese stocks, which have fluctuated from being the most valued in the world to one of the most depressed before finding equilibrium between both extremes.
Analysts attribute the recent resurgence of the Japanese stock market to the country’s emergence from a prolonged period of deflation and its transition to sustainable economic growth. Masayuki Murata, general manager of balanced portfolio investments at Sumitomo Life Insurance, commented, “As Japan becomes a normal country with inflation, its companies will have all kinds of potential.”
The overvaluation of the Japanese market in the 1980s was followed by a market crash that led to decades of economic stagnation. However, with business reforms implemented during the tenure of former Prime Minister Shinzo Abe beginning to have a positive impact and sustained inflation driven by external factors, Japan’s economy is making a notable comeback.
Despite the recent rally, many Japanese stocks remain undervalued, with more than a third of Nikkei members trading below their book value, indicating significant upside potential if managed correctly. This is in stark contrast to the inflated asset prices of 1989.
While the Japanese economy has shown signs of recovery and the Tokyo Stock Exchange continues to encourage companies to improve shareholder returns, some caution is warranted. The recent unexpected recession and suggestions of the Nikkei becoming a momentum play have raised concerns among analysts about the sustainability of the current growth.
Regardless, the record-breaking performance of the Nikkei 225 is a significant milestone for Japan, signifying a transformative change in the country’s economic landscape. Seiji Nakata, CEO of Daiwa Securities Group Inc., remarked, “It is quite symbolic to have surpassed this figure. It is proof that Japan has changed.”