Tokyo, February 24, 2024 - In a story that reads like a financial fairytale, Japan's benchmark stock index, the Nikkei 225, has shattered its intraday record on Thursday, finally exorcising the ghost of the 1989 bubble burst that haunted the nation for over three decades. This historic feat marks a symbolic resurrection, with analysts attributing it to a confluence of factors, including improved corporate governance, fading China allure, and a bet on Japan's tech prowess in the AI age.
Thursday morning witnessed the Nikkei 225 surge past 39,029 yen, surpassing both its December 1989 closing record and the intraday peak set on the same fateful day. This symbolic milestone signifies a decisive break from the shadows of the asset bubble that plunged the Japanese economy into a prolonged period of stagnation.
Fueling this ascent are foreign investors, increasingly drawn to Japan's revamped corporate governance practices and lured away by the cooling appeal of China. The Nikkei's rally since November stems from optimism about Japan's escape from deflation and its tech sector's potential to capitalize on the global AI boom. This shift in investor sentiment, driven by China's economic woes, has triggered a "virtuous cycle" of positive reinforcement, according to Morgan Stanley's Jonathan Garner.
"Japan's wages and profits are on the rise, companies are utilizing assets more efficiently," explains Garner, "This virtuous cycle is propelled by the receding tide of deflation, in stark contrast to the unfolding situation in China." This reversal of fortunes is driving significant portfolio reallocations, with billions flowing into Japan.
The recent surge in chipmaker Nvidia's sales further boosted the Nikkei. Tokyo Electron, a major player in semiconductor equipment manufacturing, soared over 5%, adding to its impressive 44% gain this year. Tech investor SoftBank Group also witnessed a 5% jump, its subsidiary Arm, a chip-design firm poised to benefit from the AI revolution, propelling its overall 40% gain in 2024.
This 34-year record-breaking journey stands out in global stock market history, exceeding even the Dow Jones Industrial Average's 25-year recovery after the 1929 crash. The Nikkei's ascension is a testament to Japan's resilience, its ability to adapt, and its potential to thrive in the new era of artificial intelligence.
