Daily Management Review

Japan's Nikkei index breaks 34-year record


Nikkei 225, the main stock index in Japan, broke the previous record of 38,915 points set in December 1989 by reaching a record high of 39,098 points yesterday. The index has increased by 17% since the start of this year.

The historic rise in Japan's stock exchange activity is attributed to a number of causes. First off, as a result of the Japanese yen's decline versus the dollar in recent months, investors have been aggressively acquiring shares of Japanese corporations. By the end of last year, Japan's GDP had already dropped to fourth position globally due to the weakness of the yen, making Germany the third-largest economy in the world.

Nevertheless, following a protracted period of deflation and stagnation, investors are starting to perceive potential in Japanese assets, indicating the possibility of near-term development in Japan's business sector and economy.

As Japan transitions to a regular inflationary nation, its businesses are well-positioned for expansion, according to Masayuki Murata, portfolio manager at Sumitomo Life Insurance, quoted by Bloomberg: "Rather than slashing costs for an extended period of time due to diminishing sales, companies are now starting to boost revenues even while costs rise."

source: bloomberg.com