Japanese equities extended their rally into the new year, with the Nikkei 225 Stock Average completing the biggest weekly gain since March 2022.
The blue-chip gauge rose 1.5 percent yesterday, buoyed by the yen’s weakening since the start of the year and upbeat expectations for the nation’s shares. It ended with a weekly advance of more than 6 percent.
The TOPIX benchmark, which has a wider variety of companies, climbed for a seventh trading session, during which all of its 33 sub-indices have advanced. The strength in Japan has taken both key indices to 34-year highs this week amid inflows from foreign investors, a favorable exchange rate and investor optimism that decades-long deflation is coming to an end.
Photo: Kyodo News via AP
Adding to the market’s momentum, Chinese investors are flocking to Japanese exchange-traded funds, with turnover in one fund rising to a record high on Wednesday. The introduction of revamped tax-free accounts this year is also playing a major role in the rally for Japanese equities.
“Large-cap stocks, high-dividend stocks, and growth stocks with foreign demand are likely to continue to attract buying due to overseas investors’ buying and from tax-exempt savings accounts,” Mizuho Securities Co market strategist Nobuhiko Kuramochi said.
A strong start to this year on the back of Japan’s outperformance of other major markets last year points to a big shift in the investment environment for the world’s third-largest economy, Nikko Asset Management Co said.
Tensions between the US and China should continue to increase attention on Japanese equities this year, Goldman Sachs Group Inc said.
Both the Nikkei 225 and TOPIX completed an annual advance of more than 25 percent last year — their best performance in a decade.
While the all-country index is popular with tax-exempt retirement savings accounts known as NISA, Japanese companies that have high dividends are also attracting demand, Asset Management One chief strategist Takeru Ogihara said.
“There is a possibility that investors will buy in the first half of the year before March, or move a little ahead of schedule,” he added.
Electric appliances and exporting companies were the largest contributors to the TOPIX yesterday as the yen headed for a second weekly loss on the receding view that the Bank of Japan would end its negative interest rate this month.
Fast Retailing Co led gains in the Nikkei 225, jumping to a record high after the Uniqlo owner’s first-quarter operating profit beat the average analyst estimate.
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