Nikkei breaks record high on strong earnings and reforms

Nikkei breaks record high on strong earnings and reforms

Japan’s benchmark Nikkei 225 index soared to a new all-time high of 38,924.88 on Thursday, surpassing the previous peak reached in 1989. The index has been boosted by impressive corporate earnings and investor-friendly measures in Japan.

 

Pedestrians walking across with crowded traffic at Shibuya crossing square.

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The Nikkei and the broader Topix have outperformed other markets in the Asia Pacific, rising more than 10% in 2024 after gaining more than 25% in 2023. This was the best annual performance for both indexes in at least a decade.

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The strong earnings of Japanese companies have led Bank of America equity strategists to raise their 2024 year-end forecasts for the Nikkei 225 to 41,000 from 38,500. They also increased their forecasts for the Topix to 2,850 from 2,715.

The rally has also been supported by a weaker yen, which has lost about 6% against the dollar this year and is approaching the 33-year lows reached last year. A weaker yen benefits Japanese exporters, which make up a large part of the Nikkei 225.

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Another factor that has fueled the optimism in the Japanese market is the government’s push for greater corporate governance reforms. The Tokyo Stock Exchange has introduced new rules to encourage companies to improve their capital efficiency and shareholder returns. For example, companies that trade below a price-to-book ratio of one may face delisting as soon as 2026.
Investors have also been attracted by Japan’s potential to overcome its deflationary cycle and to benefit from the global supply-chain diversification amid the US-China tensions.

Source : CNBC

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