Japan’s Nikkei 225 index has staged a significant comeback, soaring by 6% to reach 33,113.17 points. This robust rebound comes after the index had plummeted to an 18-month low, marking a 26.6% decline from its July 2024 peak of 42,426 points. The resurgence is largely attributed to the strong performance of U.S. tech stocks, which has bolstered investor sentiment in Japan.
The broader Topix index mirrored this positive trend, climbing 6.83% to settle at 2,444.89. Notable gains were observed in the technology sector, with Tokyo Electron advancing by 8.62% and Advantest, a leading supplier of chip-testing equipment, surging by 11.56%. The banking sector also experienced substantial upticks; Mitsubishi UFJ Financial Group rose by 12.30%, while Mizuho Financial Group increased by 13.98%. Trading companies such as Mitsui & Co, Sumitomo Corp, and Itochu also posted gains of 6.38%, 7.87%, and 6.08% respectively.
This upward momentum in Japanese equities follows a tumultuous period marked by the U.S. administration’s tariff hikes, which had previously triggered a selloff in banking and technology stocks. Despite ongoing concerns about economic slowdown and escalating inflation, the resilience of the tech-focused Nasdaq in the U.S. has provided a semblance of optimism. President Donald Trump’s unwavering stance on tariff policies, coupled with warnings of potential further tariff increases on China, continues to influence market dynamics.
The Nikkei 225, a key barometer of Japan’s stock market, has a storied history of volatility. Established in 1950, the index experienced exponential growth during the Japanese asset price bubble, reaching an all-time high of 38,915.87 in December 1989. However, it subsequently underwent a prolonged period of decline, hitting a post-bubble low of 6,994.90 in October 2008. The recent resurgence reflects a complex interplay of domestic and international factors influencing investor behaviour.
The recent 6% surge in Japan’s Nikkei 225 index underscores a renewed sense of investor confidence, spurred by positive cues from U.S. tech stocks. While challenges such as trade tensions and economic uncertainties persist, the current market dynamics suggest a cautiously optimistic outlook for Japanese equities.
Fidelity Japan Trust PLC (LON:FJV) aims to be the key investment of choice for those seeking Japanese companies exposure. The Trust has a ‘growth at reasonable price’ (GARP) investment style and approach – which involves identifying companies whose growth prospects are being under-appreciated or are not fully recognised by other investors.
