On the last trading day of the year, Japanese shares posted their best annual performance in more than four decades, leaving other major markets in the dust.
Foreign investors piled into the long-laggard market this year as the government and central bank unveiled measures aimed at stoking the world’s third-largest economy that sent the yen plummeting against the US dollar and cheered exporters.
Tokyo’s benchmark Nikkei 225 index finished yesterday up 0.69 percent at 16,291.31, about 57 percent higher than its close of 10,395.18 last year.
That marked the Nikkei’s best annual return since 1972 when it nearly doubled, outpacing a booming Wall Street which has seen the Dow and S&P 500 power to record highs.
The broader TOPIX index of all first-section shares, up 0.95 percent on the day to 1,302.29, skyrocketed nearly 52 percent from a year ago.
“This has been a boom year — it’s been a long time since we’ve seen such a robust performance,” said Hikaru Sato, a senior technical analyst at Daiwa Securities.
The Japanese currency has lost about a fifth of its value against the greenback since the start of the year, providing a much-needed boost to Japanese exporters. In afternoon Tokyo trade, the US dollar bought ￥105.35, well up from the ￥87 level at the end of last year.
The yen’s decline helped push Sony shares to ￥1,826, nearly double from a year ago, as the embattled electronics giant repaired its battered balance sheet, while Toyota stock soared 60 percent to ￥6,240.
Japan’s biggest bank, Mitsubishi UFJ, rose 50.5 percent and shares of Uniqlo operator Fast Retailing almost doubled to ￥43,400.
Shares in mobile carrier SoftBank, which took control of US-based Sprint Nextel in a headline-grabbing US$21.6 billion deal this year, almost tripled to ￥9,200.
Despite the huge gains, the Nikkei remains a shadow of its former self. The market peaked at almost 39,000 in the last days of 1989 before Japan’s asset bubble popped, dealing a huge blow to the economy and sending the Nikkei plunging over the next two decades.
And despite the upbeat mood in the market, fueled by a strong pick-up in the US economy and improvements domestically, traders have mixed feelings about what to expect for next year.
While the most bullish say Japanese Prime Minister Shinzo Abe’s big-spending policy blitz is a key confidence driver, some offer a word of caution.
“I expect the Nikkei to rise to the 20,000 level next year,” Tokai Tokyo Securities analyst Seiichi Suzuki said. “Abenomics has contributed a lot to the market in terms of risk sentiment.”
Major Japanese brokerage house Nomura Securities said it expected the Nikkei to see-saw through the year before ending at around 18,000.
“We keep our view that Japanese share prices will remain on an upward trend next year, on the back of an increase in companies’ profits and expectations for Abenomics,” it added.
Analysts have warned that Abe’s pro-growth program — a mix of big government spending and central bank monetary easing — is not enough without promised economic reforms. And with a sales tax rise planned for April, there are fears that consumer spending will take a dive and stall a budding recovery.
Tokyo has committed about US$54 billion in extra spending to blunt the impact of the tax rise, while there is growing speculation the Bank of Japan will step in with another round of monetary easing to prop up growth.