Tokyo stocks extend rally as Nikkei 225 reaches 1990 high

JAPANESE stocks extended gains, with the Nikkei 225 Stock Average reaching its highest in nearly 33 years, as optimism the US will avoid default added to bullish sentiment that has fuelled one of the world’s best equity rallies of 2023.

The Nikkei 225 advanced 0.8 per cent to 30,808.35, pushing the blue-chip gauge to levels unseen since August 1990. The Topix, which maintained a 33-year high set earlier this week, gained 0.2 per cent, as electronics makers and service-sector firms provided the biggest boosts. 

Both gauges completed their sixth-straight week of gains as strategists from Goldman Sachs Group to Macquarie Group said the case for a bull run is solid thanks to corporate governance reforms boosting valuations and loose monetary policy adding to tailwinds. Morgan Stanley forecast the Topix could eventually climb an additional 9 per cent to reach 2,350, propelled by themes of return-on-equity improvement and a favourable yen.  

“We believe that there are a lot of legs to this rally,” Belita Ong, chairman at Dalton Investments, said on Bloomberg TV. “The reality is that the Japanese market has been cheap for a very long time and for good reason, because managements were not willing to share their profits with investors.”

The latest leg of the rally gained momentum on Friday as the yen touched its lowest this year, lifting shares of exporters and increasing the purchasing power of dollar-based investors looking to buy Japanese stocks. Exchange data released Thursday showed foreign investors were net buyers of Japanese equities for a sixth-straight week, acquiring a net US$5.6 billion worth of shares and futures in the week ended May 12. 

The Topix achieved the longest weekly winning streak since November 2017. Still, the index remains 25 per cent away from its 1989 peak. 

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Investors in Tokyo also breathed a sigh of relief on signals that American lawmakers are making progress on debt-ceiling talks and will be able to avert a first-ever default. The S&P 500 hit a nine-month high on Thursday, while the Nasdaq 100 rallied almost 2 per cent to the highest since April 2022. BLOOMBERG