Nikkei Hits 34-Year High as Tech Shares and Strong Earnings Drive Japanese Stock Market
Tokyo, Japan – In a remarkable surge, Japan’s Nikkei share average closed at a fresh 34-year high on Tuesday, driven by the strength of tech-related shares and impressive corporate earnings. After a long holiday weekend, trading resumed with a bang, propelling the benchmark stock index to its highest level since January 1990.
The Nikkei soared by 2.89% to reach 37,963.97, briefly surpassing the 38,000-point mark. The broader Topix also experienced a significant boost, rising by 2.12%. This surge was primarily fueled by the chip-sector giant Tokyo Electron, which emerged as the best performer of the day with an impressive gain of 13.33%.
Another notable gainer was SoftBank Group Corp, which saw a rise of 6.27%. This surge was attributed to the rally in semiconductor developer ARM Holding, in which SoftBank holds a substantial 90% stake. Tokio Marine Holdings Inc and MS&AD Insurance Group Holdings Inc also experienced substantial gains, rising by 11% and 10.82%, respectively.
The Japanese stock market received a further boost from the strong performance on Wall Street and a weakened yen. The devaluation of the yen proved advantageous for exporters as it increased the value of their overseas revenue. Throughout the trading session, the yen traded around 149.47 per dollar.
JP Morgan analysts expressed their confidence in the Japanese equities market, stating, “We have raised our outlook for Japanese equities in 2024, taking into account changes in macroeconomic conditions, including the yen weakening early in the year, and progress on structural reforms.” They revised their projections for the Topix from 2,500 to 2,650 and for the Nikkei 225 from 35,000 to 37,000.
Out of the 225 constituents of the Nikkei index, an impressive 196 saw gains while only 26 experienced declines. As the Nikkei continues its ascent towards its all-time high, market participants eagerly await the release of the US consumer price index (CPI) report later in the day. The CPI report is expected to have a significant impact on the Japanese market.
Charu Chanana, the head of currency strategy at Saxo Markets, highlighted the correlation between the Nikkei’s movements and the strength of the yen. She noted, “Nikkei moves have been more closely tied to the yen recently, suggesting that any yen strength on the back of US CPI release today, or signs of verbal intervention, could tactically disrupt the rally in Nikkei.”
However, not all companies experienced gains during this period of market exuberance. Otsuka Holdings saw a decline of 5.05% after announcing that its experimental drug had failed to meet a primary late-stage trial goal in treating agitation associated with dementia due to Alzheimer’s disease.
Overall, the Japanese stock market’s remarkable surge to a 34-year high is a testament to the strength of tech-related shares and robust corporate earnings. The rally was further supported by a weakened yen and a positive performance on Wall Street. As investors eagerly await the US CPI report, the future trajectory of the Nikkei remains uncertain. Nonetheless, market participants remain cautiously optimistic about the continued growth of Japanese equities.