Nikkei Index Hits 34-Year High, Notching Best Week Since March 2022

Japan’s Nikkei index surged to its highest level in 34 years on Friday, marking its most impressive week since March 2022. The rally was bolstered by diminishing expectations that the Bank of Japan would imminently shift away from its monetary easing policy and a resurgence of foreign investor interest.

Closing at 35,422.95 points on Friday, the Nikkei recorded a gain of 1.06 percent, reaching as high as 35,839.65 points during the day – a level not seen since February 1990. The index experienced a remarkable ascent throughout the week, rising nearly seven percent each trading day.

The recent surge in volatility, reaching levels not seen since October 31, coincides with increased uncertainty surrounding the Bank of Japan’s policy stance, particularly after its unexpected adjustment in October 2022, allowing bond yields to rise.

The market sentiment was influenced by a perception that the Bank of Japan might not abandon its negative interest rate policy during its upcoming meeting on January 22-23, supported further by recent wage data suggesting a potential slowdown in the central bank’s shift toward tightening monetary policy.

Foreign investors contributed significantly to the positive momentum, with Finance Ministry data revealing a net purchase of Japanese stocks amounting to 296.2 billion yen ($2.04 billion) for the week ending January 6. This marked a reversal from two weeks of selling.

Year-to-date, the Nikkei has experienced a robust 6.3 percent increase, making it the only major global index, aside from the U.S. Standard & Poor’s 500 index, to achieve gains. In contrast, the British Financial Times index dipped around 2 percent, while the Hang Seng Index in Hong Kong experienced a decline of 4.43 percent. The Nikkei’s impressive performance reflects a unique resilience and positive investor sentiment in the Japanese market.