Japanese Stocks Surge to Highest Levels in Over Three Decades Amidst Weaker Yen and Caution over BOJ Policy

Japanese Stocks Surge to Highest Levels in Over Three Decades Amidst Weaker Yen and Caution over BOJ Policy | CIO Women Magazine

In a remarkable ascent, Japan’s Nikkei share average reached its highest levels since February 1990 on Thursday, propelled by a weakening yen and diminishing concerns over an imminent policy tightening by the Bank of Japan (BOJ). The Nikkei (.N225) marked its third consecutive day of gains this week, surging by 1.77% to close at an impressive 35,049.86, the highest in nearly 34 years. Additionally, the index appeared poised to secure its most substantial weekly gain since late March 2020. The broader Topix (.TOPX) also participated in the rally, rising by 1.57% to conclude at 2482.87.

The recent seismic activity in western Japan, coupled with lackluster wage growth data, has prompted market participants to reassess their expectations regarding the BOJ’s normalization of monetary policy. Tony Sycamore, a market analyst at IG, noted that the earthquake and the persistently weak wage growth, which saw real wages decline for the 20th consecutive month in November, have influenced the market’s perception of the BOJ’s future policy moves.

The uncertainty created by these factors gave the Nikkei the impetus to breach the 35,000 level, with Sycamore suggesting that the index could continue making gains as market participants evaluate the timing of the BOJ’s next policy step.

Weaker Yen Boosts Exporters as Japanese Stocks Benefit from Wall Street Momentum

The yen’s 0.9% decline against the U.S. dollar overnight has proven to be a significant factor in the Nikkei’s surge, as a weaker yen tends to bolster exporter shares. This currency dynamic increases the value of overseas profits for Japanese firms when repatriated to Japan in yen terms. During Asian trading hours, the yen hovered around 145.52 against the U.S. dollar, reflecting the positive impact on the Japanese stock market.

Japanese stocks also drew strength from the upbeat performances on Wall Street, where megacaps experienced a rally. Notable gainers on Thursday included SMC Corp (6273.T), which rose by 4.69%, Itochu Corp (8001.T) with a gain of 4.5%, and telecommunications company KDDI Corp (9433.T), closing higher at 4.21%. Other top performers included Sony Group Corp (6758.T) with a 3.54% increase and Suzuki Motor Corp (7269.T) gaining 3.86%.

Winners and Losers in the Japanese Stock Market

Thursday’s winners in the Nikkei were led by SMC Corp, followed by Itochu Corp and KDDI Corp. SMC Corp’s 4.69% gain showcased its resilience in the current market conditions. Meanwhile, major companies such as Sony Group Corp and Suzuki Motor Corp also posted significant gains.

However, some Japanese Stocks experienced losses, with Yamato Holdings Co Ltd (9064.T) down by 3.85%, Rakuten Group Inc (4755.T) losing 2.44%, and Tokyo Gas Co Ltd (9531.T) down by 1.43%. These losses, while notable, did not overshadow the overall positive sentiment that has driven the Nikkei to new heights.

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