Japan’s long-suffering stock market is back. This boom may have ‘staying power’

After a wait spanning over three decades, Japan’s stock market has finally found its moment in the sun. The country’s major stock indexes are currently trading at levels unseen since 1990, during the period when the notorious asset bubble of the late 1980s was gradually deflating.

Since the beginning of this year, the benchmark Topix index has surged by nearly 14%, while the Nikkei 225, which tracks Japan’s blue-chip companies, has experienced an impressive leap of almost 17%. These remarkable gains have outpaced the S&P 500 in the United States and Europe’s Stoxx 600 benchmark indexes, both of which have risen by 8% during the same period.

Jeffrey Atherton, an investment manager at Man GLG, a subsidiary of hedge fund giant Man Group, shared his insights, stating, “In my 33 years in the market, things do seem probably more positive now than they’ve seemed at any time in that whole period. It’s not based on hype.” Atherton’s observation highlights the genuine optimism surrounding the Japanese stock market.

Investors attribute the surge in Japanese stocks to several key factors. Firstly, Japanese stocks have been deemed relatively undervalued, providing an attractive opportunity for investors. Additionally, there has been a long-awaited return of inflation, which has further buoyed market sentiment. Furthermore, the weakening of the Japanese currency has played a favorable role in boosting the stock market’s performance.

The endorsement of Japanese stocks by renowned investor Warren Buffett also contributed to the market’s bullish outlook. In April, Buffett revealed in an interview with Japanese publication Nikkei that his flagship investment firm, Berkshire Hathaway, intended to increase its holdings in five Japanese companies. Such an endorsement from an investment luminary like Buffett has undoubtedly bolstered investor confidence and acted as a catalyst for market momentum.

As the Japanese stock market continues its upward trajectory, market participants are witnessing a significant turning point for the country’s equities. With a confluence of factors favoring growth and renewed investor enthusiasm, Japan’s stock market appears poised to build on its recent successes and potentially pave the way for sustained economic growth in the future.