02/22/2024 – 8:18
More than three decades after the brutal explosion of a speculative bubble, the Tokyo Stock Exchange surpassed this Thursday (22) the historical record that had been recorded at the end of 1989.
The benchmark Nikkei 225 index closed up 2.19% and with a result of 39,098.68 points, surpassing the previous record of 38,915.87 units, recorded on December 29, 1989.
The Japanese stock exchange's benchmark index rose 28% in 2023, the best annual return in 10 years, and has already accumulated growth of almost 17% since the beginning of 2024.
Several factors explain the good result, but the main one is the devaluation of the yen, which makes Japanese shares more attractive to foreign investors and artificially inflates the results of their export-oriented companies.
The devaluation of the Japanese currency is a consequence of the divergence between the Bank of Japan's ultra-flexible monetary policy compared to its counterparts in other countries, which have significantly increased their interest rates from 2022 to contain inflation.
The Tokyo Stock Exchange is supported “by the hope that the yen will remain cheap, taking into account the flexible monetary policies of the Bank of Japan, which will imply an increase in prices and wages”, recently commented Takahide Kiuchi, economist at Nomura Research Institute .
– No bubble, for now –
The Tokyo Stock Exchange is also benefiting from the stagnation of Chinese financial markets, pressured by the real estate crisis and the country's slow economic recovery.
Foreign investors, concerned about geopolitical risk but wanting to keep their assets in Asia, consider Tokyo a good alternative to Chinese markets.
A good example is the famous American investor Warren Buffett, who has invested in several Japanese companies since 2020 and who last year reaffirmed his confidence in the Tokyo market.
Furthermore, Japanese companies take better care of their shareholders than in the past, with higher dividends and more frequent bond buybacks.
Domestically, the existence of more generous tax incentives in the archipelago from 2024 onwards has encouraged even more Japanese people to invest in the stock market.
Despite the record, analysts do not see this growth as a bubble like that of the 1980s, when the price per square meter in some Tokyo neighborhoods was 350 times higher than that recorded in Manhattan (New York).
“Stock prices are not that expensive compared to the bubble years,” said Asuka Sakamoto, chief economist at Mizuho Research & Technologies.
In fact, the Japanese economy is still fragile and recorded a small recession at the end of 2023, linked to the devaluation of the yen and inflation.
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