Japan’s Nikkei Hits Record High

Japan’s stock market has achieved a historic milestone by surpassing its previous peak set in 1989, marking a significant moment after enduring decades of economic stagnation. Tokyo’s benchmark Nikkei 225 index surged nearly 0.7 percent in morning trading on Monday, continuing its remarkable rally that has positioned Japanese stocks as some of the most attractive investments over the past year.

Leading the charge were major players such as Mitsubishi UFJ Financial Group and pharmaceutical giant Daiichi Sankyo, contributing to the index’s upward trajectory. Last Thursday, the Nikkei broke through its all-time high of 38,915.8 points, a level last seen in 1989 before Japan experienced a tumultuous asset crash, ushering in a period of prolonged economic challenges often referred to as “lost decades.”

The resurgence of the Nikkei reflects a remarkable turnaround, with the index posting a remarkable gain of 28.2 percent throughout 2023, outpacing even the robust performance of the S&P 500. This resurgence has been fuelled by a combination of factors, including inflows of foreign investment drawn by the weakening yen and corporate governance reforms that have enhanced shareholder returns.

However, despite the stock market’s revival, Japan’s overall economy continues to grapple with persistent challenges, including sluggish growth attributed to structural issues such as a declining population and a rigid labor force. Earlier this month, Japan officially entered a recession, relinquishing its status as the world’s third-largest economy to Germany.

In contrast to Japan’s positive momentum, other Asian markets experienced declines on Monday. Both Hong Kong’s Hang Seng index and the Shanghai Composite index dipped by 0.7 percent, while South Korea’s Kospi slid by 0.8 percent. These fluctuations underscore the divergent economic trajectories across the region, with Japan’s remarkable stock market performance standing in contrast to broader economic challenges facing Asia.