Japan: Nikkei Index Surges Past 1989's Record High

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Facts

  • Japan's Nikkei 225 stock average hit a record closing high on Thursday after the blue-chip index increased 2.2% to 39,098.68, surpassing the previous highest closing level of 38,915.87 recorded in 1989.1
  • The Nikkei 225, a benchmark stock index in Japan, rose as high as 39,156.97 points, also beating the previous intraday all-time peak of 38,957.44 points achieved on Dec. 29, 1989.2
  • The market was reportedly boosted after Nvidia's shares jumped 12% in premarket trade as the US chipmaker posted increased earnings and forecasted first-quarter revenue growth of 233% due to demand for its artificial intelligence (AI) chips.3
  • The Nikkei is up 17% since the beginning of 2024, which, according to data from Japan Exchange Group, has been influenced by foreign investors who invested $14B into the market in January.4
  • Share prices in Tokyo have risen approximately 44% in the past year, while stocks have fallen more than 11% and 22% in Shanghai and Hong Kong, respectively, from 12 months ago.5
  • This comes after a decrease in Gross Domestic Product and the value of the yen caused the country to slip into a technical recession, with Japan losing its position as the world's third-largest economy.6

Sources: 1Bloomberg, 2DAWN.COM, 3Guardian, 4New York Times, 5Japan Today and 6CNN.

Narratives

  • Narrative A, as provided by CNN. Record gains in Japan's benchmark stock index are driven by improved corporate governance and investment flows diverted from a battered Chinese stock market. The blue-chip index has successfully defied a recession in Japan alongside wars in Europe and the Middle East. While it may be volatile in the short term, the Nikkei could once again become Asia's most valuable stock market as Tokyo shows signs of change.
  • Narrative B, as provided by Bloomberg. The current boom in the Nikkei could be a fleeting affair, and it's too early to suggest that Japan is on course for global dominance. The long-term outlook for Japanese equities remains one fueled by skepticism. No matter how bullish foreign investors are today, until the Bank of Japan learns from its past mistakes and the country fixes its political trajectory, economic challenges - including inflation and slow wage growth - will not go away.