Japanese stocks reach a 30-year high
Japan’s Nikkei 225 stockmarket index has broken through the 30,000-point level for the first time since 1990.
![Cherry blossoms and Mount Fuji](https://cdn.mos.cms.futurecdn.net/QGmGCAoiYq9gwxHgX2kLDc-415-80.jpg)
After several decades of “false dawns” the sun is finally rising on Japanese shares, says Ian Cowie on Interactive Investor. The Nikkei 225 index has broken through the 30,000-point level for the first time since 1990. Roaring Japanese markets had dominated financial headlines for much of the 1980s. When “the music stopped” few could have predicted that it would be such a long climb back. Sadly, “quite a few long-term investors in the world’s third-largest economy” didn’t live to see this day.
A protracted post-bubble hangover
The “lost decades” after the stockmarket bubble’s implosion have turned Japanese equities into the “red-headed stepchild of global asset allocation”, says Udith Sikand for Gavekal Research. There have been moments of hope: foreign investors poured $240bn into the local market after former prime minister Shinzo Abe’s second term began in 2012. But they soon became disillusioned, withdrawing all of those funds by the time his premiership ended last summer. They shouldn’t have: corporate reforms under Abe have led to “structural improvements in Japan Inc.’s profitability”.
Don’t let the Nikkei fanfare distract from Japan’s economic problems, says The Japan Times. They range from “stunted” productivity to an overdependence on “old economy” industries. The latest rally may not have much further to run. The market may have broken through the 30,000 mark, but it remains well short of 38,957, the all-time high it reached in 1989. “Only in Japan” would analysts say things had gone too far when the market is trading “where it was 30 years ago”, Nicholas Smith of CLSA told Eustance Huang on CNBC. Few foreign investors have noticed, but local shares have been performing strongly for a while: the Topix stock benchmark has gained 125% since late 2012, outperforming many other major markets. The Nikkei 225 has soared by more than 10% since 1 January, compared with a 3.4% gain in the pan-European Stoxx 600 and a 4.2% rise on the S&P 500.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
![https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg](https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748-320-80.jpg)
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Nikkei exorcises its demons
While 30,000 may be an arbitrary number, the “historic resonance of 1990 is powerful”, says Leo Lewis in the Financial Times. Japanese stocks have long been held back by a folk memory of the “deranged…bubble era”. In the years since, local investors could be expected to sell whenever shares rallied too much for fear of being burned again. The fact that the Nikkei has finally broken above 30,000 and stayed there suggests it is no longer overshadowed by its “manic alter-ego of 1989”.
The world has changed immensely in the three decades since the Nikkei was last at 30,000, says Graham Smith on fidelity.co.uk. Japan was then considered America’s “number-one” challenger; Chinese markets were “well off the radar for most investors”. Once eye-watering valuations have also come down, from as high as 75 times earnings in the early 1990s to 25 today – “a small discount” to global peers. The market’s stable of carmakers, electronics firms and banks is well placed to enjoy a profit surge as global recovery takes hold. “The stars seem to be aligning for Japan.”
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Regulator moves to protect access to cash amid branch closures and disappearing ATMs
News The Financial Conduct Authority has told banks to start assessing if local communities have adequate cash access from mid-September
By Marc Shoffman Published
-
VAT hike on private school fees could come earlier than previously expected
The government could start charging VAT on private school fees as soon as January 2025, according to the latest reports. What does it mean for parents?
By Katie Williams Published
-
UK mid-caps: an improving outlook
UK mid-caps have perked up and the rally may run further, but long-term investors should remain selective
By Cris Sholto Heaton Published
-
The tobacco industry is going smoke-free - how to profit from it
Tobacco companies have realised their traditional products are on the wane. But new opportunities have opened up – and should prove lucrative
By Rupert Hargreaves Published
-
Is it time to invest in creative industries?
Any industrial strategy should not overlook the creative industries, one of our top national assets
By David C. Stevenson Published
-
Is Mercia Asset Management set for success?
Mercia Asset Management helps the government fund smaller companies in Britain’s regions. Should you invest?
By Rupert Hargreaves Published
-
British stocks set for a boost
British stocks are due for a bounce as the UK looks more stable compared to many economies
By Alex Rankine Published
-
Ocado shares jump by a fifth
Ocado takes a turn for the better after attractive profit forecasts were announced
By Dr Matthew Partridge Published
-
The AI boom is on borrowed time
The hype around the AI boom could be on its way out – but why?
By Alex Rankine Published
-
Diploma: a blue-chip set for strong growth
Diploma, whose niche products include seals and fasteners, serves an array of growth markets. Should you invest?
By Dr Mike Tubbs Published