Japan’s Stock Market Reaches Record High

Japan’s benchmark stock index surged above 40,000 points for the first time ever, driven by strong corporate earnings and a boom in chip-related stocks. The Nikkei Stock Average closed at 40,109.23 on Monday, marking a 0.5% increase.

Chip Stocks Drive Growth

Semiconductor-testing equipment maker Advantest saw a 3.7% increase, chip maker Renesas Electronics rose by 4.9%, and Lasertec, a chip production equipment manufacturer, gained 2.4%. This surge in chip-related stocks comes amidst growing enthusiasm for artificial intelligence technologies.

Setting New Records

On February 22, the Nikkei index hit an all-time high for the first time in 34 years, surpassing the previous record set during Japan’s asset bubble in 1989. Despite concerns regarding the Bank of Japan potentially changing its ultra-low interest rate policy, the index continued to reach new record highs.

Market Momentum & Economic Factors

The Nikkei Stock Average has climbed by 20% this year, following a 28% rise in 2023. Factors contributing to this growth include modest inflation, enhanced corporate governance, and a weakened yen, which boosts corporate profits earned globally when converted back to yen.

Moving Forward

After a prolonged period of deflation and slow economic growth, the Japanese stock market is now experiencing significant gains. The Bank of Japan is considering a shift away from its ultra-loose monetary policy, with discussions beginning on a potential exit strategy. The Japanese government bond yield also saw a notable increase to its highest level since May 2011.