Japan’s Nikkei Index Surges to 34-Year High, Led by Shipping and Financial Sectors

-
Japan’s Nikkei Index Touched All-Time-High

Japan’s benchmark stock index, the Nikkei, has reached an unprecedented 34-year high, crossing the 36,000 mark for the first time since February 1990. This milestone, primarily driven by a significant rally in the shipping sector, reflects a renewed wave of investor optimism regarding Japan’s economic recovery and the global rebound from the pandemic-induced downturn.

The Nikkei finished the day nearly 1% higher at 35,901.73 on Monday, Jan 15, 2024, after touching the highest level in its history at 36,008.23. The index rallied nearly 7% and marked a multi-decade high every trading day this week, posting its best performance in 22 months.

Value shares outperformed after lagging growth stocks last week, as investors rotated their portfolios to take advantage of the improving macroeconomic outlook. The broader Topix, which is less weighted towards technology shares than the Nikkei, rose 1.22% on the day and also touched a new 34-year high during the session. The Topix value share sub-index climbed 1.55%, outpacing a 0.88% rise for the growth share sub-index.

The Tokyo Stock Exchange’s (TSE) shippers index jumped 5.3% to lead gains among the 33 industry groups, with geopolitical risks pushing up shipping rates. Shares of financials, which had retreated sharply on Friday, rebounded strongly. The TSE’s index of securities firms rallied 4.56%, while banking advanced 2.19%.

The continued gains for Japanese stocks come despite signs of overheating. One closely watched technical indicator called the relative strength index, or RSI, climbed to 76.41 for the Nikkei, with readings above 70 signaling “overbought” conditions. “The Nikkei is displaying surprising strength”, and some form of adjustment in the speed of the rally is likely this week, said Kazuo Kamitani, a strategist at Nomura Securities.

Providing another tailwind, after the close of Monday’s trading, the TSE will begin publishing a monthly list of companies that have disclosed plans to boost capital efficiency. The TSE’s corporate governance initiatives are “generating a lot of excitement”, said Daniel Hurley, portfolio specialist of emerging market and Japan equities at T Rowe Price. "It’s why foreign investors, activist investors, hedge funds and Warren Buffett and Berkshire Hathaway are paying close attention to Japan today."

The Nikkei’s surge also reflects a retreat in US bond yields and a stabilisation in the yen exchange rate, which have eased concerns over the impact of higher interest rates and a stronger currency on Japan’s export-oriented economy. The yield on the benchmark 10-year US Treasury note fell to 1.76% on Monday, down from a 10-month high of 1.88% last week. The dollar traded at 112.65 yen, slightly below a four-year high of 113.18 yen reached on Friday.

Japan’s economy has shown signs of resilience amid the COVID-19 pandemic, expanding by an annualised 6.1% in the third quarter of 2023, beating market expectations. The government has also announced a record 56.8 trillion yen ($504 billion) stimulus package to support the recovery and accelerate the transition to a greener and more digitalised society.

Analysts expect the momentum to continue for Japanese stocks, as the country prepares to host the Winter Olympics in February 2024, which could boost consumer spending and tourism. Japan also aims to achieve carbon neutrality by 2050 and become a global leader in hydrogen and renewable energy.

However, some challenges remain, such as the slow pace of vaccination, the emergence of new variants of the coronavirus, and the potential tightening of monetary policy by the US Federal Reserve. Japan also faces geopolitical tensions with China and North Korea, as well as domestic issues such as an ageing population and a shrinking workforce.

Despite these uncertainties, Japan’s Nikkei index has shown remarkable strength and resilience, breaking new records and attracting global attention. The index, which started in 1950 with a base value of 176.21, has come a long way since then, overcoming several crises and shocks along the way. As Japan enters a new era of growth and innovation, the Nikkei may have more room to rise and shine in the global market. 



Thanks for Reading 🙏

Connect with Author on LinkedIn 

Follow FinGlimpse on Twitter, Instagram, LinkedIn, Flipboard, WhatsApp, Telegram  

Category:

Comments

Post a Comment

Please post your valuable insights on this article for other readers to better interpret this article and become a more informed person.

Also read:

Germany's Two-Speed Economy: Consumer Boom Masks Industrial Struggles

-
Image
After enduring two challenging years marked by stagnation, Germany’s economy is showing promising signs of revival. The resurgence, primarily driven by consumer spending, is a welcome change from the near-zero growth that has characterized the country’s economic landscape recently. However, this consumer-led growth masks a more deep-seated issue within the industrial sector, which continues to struggle without a clear solution in sight. Consumer Confidence Fuels Economic Optimism Consumer confidence is often regarded as the pulse of the economy—a measure of the average consumer’s economic outlook and their propensity to spend. In Germany, this sentiment has seen a significant uptick, reflecting broader economic optimism. The GfK Consumer Climate Study reveals a marked improvement in economic and income expectations, despite a moderate decline in the propensity to buy after three consecutive increases. This mixed sentiment underscores the cautious yet hopeful disposition of German consu...
Read more

The European Central Bank’s Strong Euro Dilemma: Navigating Monetary Policy Amid Currency Appreciation

-
Image
In the dynamic and often unpredictable world of international finance, central banks constantly face the challenge of balancing domestic economic objectives against the complex interplay of global capital flows and currency valuations. The European Central Bank (ECB) currently grapples with one of its most perplexing dilemmas in recent memory: a notably strong euro despite a series of monetary easing efforts designed to stimulate growth and lift inflation within the eurozone. Over the last four months, the euro has appreciated by more than 10% against the U.S. dollar, an outcome that has taken policymakers by surprise and complicated their monetary strategy. The ECB’s forthcoming decision to cut its main refinancing rate to 2% underscores its continued commitment to support the eurozone economy, but the accompanying strong euro threatens to blunt the stimulative effects of these rate cuts, introducing a range of economic challenges that require nuanced and carefully calibrated respons...
Read more

The U.S. Government Sues Adobe Over Deceptive Subscription Practices

-
Image
In a landmark legal action, the United States government has filed a lawsuit against Adobe Inc., accusing the software behemoth of engaging in deceptive and unfair practices related to its online subscription services. This case, brought jointly by the Department of Justice (DOJ) and the Federal Trade Commission (FTC), alleges that Adobe has violated the Restore Online Shoppers' Confidence Act (ROSCA). The primary allegations are that Adobe has been imposing hidden fees, creating unnecessary obstacles in the subscription cancellation process, and failing to provide clear and transparent information to consumers. The lawsuit revolves around three primary allegations against Adobe. Firstly, the complaint claims that Adobe has been concealing significant early termination fees in fine print and behind hyperlinks. These fees, which can reportedly amount to hundreds of dollars, are only disclosed to customers when they attempt to cancel their subscriptions. This lack of upfront disclosu...
Read more

The Indian Navy’s Valiant Rescue: A Beacon of Maritime Security

-
Image
In the vast expanse of the Indian Ocean, piracy has long been a threat to the safety of seafarers and the security of maritime trade routes. The recent hijacking of the MV Ruen, a Malta-flagged cargo ship, by Somali pirates brought this issue to the forefront once again. However, the swift and decisive action by the Indian Navy not only thwarted the pirates’ plans but also highlighted India’s commitment to combating piracy and ensuring freedom of navigation in the region. The operation, spearheaded by INS Kolkata, was a testament to the Indian Navy’s preparedness and strategic capabilities. Approximately 2,600 kilometers from the Indian coast, the Navy intercepted the hijacked vessel, leading to the surrender of 35 pirates and the safe evacuation of the crew, which included nationals from Bulgaria, Angola, and Myanmar. This operation was not just a military success; it was a diplomatic triumph, fostering goodwill between India and Bulgaria, as evidenced by the Bulgarian President’s exp...
Read more

China’s Economic Strategy for 2025: A Record 3 Trillion Yuan in Special Treasury Bonds

-
Image
In a bold move to revitalize its slowing economy, China plans to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025, according to a Reuters report. This announcement marks a significant escalation from the 1 trillion yuan issued in 2024 and underscores the urgency with which policymakers aim to tackle the challenges of sluggish growth, flagging consumption, and investment bottlenecks. This article delves into the implications, objectives, and potential outcomes of this ambitious fiscal measure while examining its broader context within China’s economic landscape. China’s economy has been grappling with headwinds stemming from multiple factors, including weakened global demand, domestic property market distress, and a decline in consumer confidence. The decision to quadruple the issuance of special treasury bonds reflects Beijing’s determination to leverage fiscal policy as a tool to stabilize and stimulate the economy. Special treasury bonds are distinct fr...
Read more