The Japanese stock market is on a bull run, with the Nikkei 225 Index hitting its highest level since 1989. This surge comes after more than three decades of economic struggles, with the index up over 19% year to date and nearly 39% over the last 12 months. This outpaces the S & P 500’s gains, with foreign investors driving much of the market’s growth.
Pessimism surrounding China’s economy has also played a role in boosting the Japanese market, as global investors shift their focus to Japan. Large-cap stocks, particularly in the tech sector, have been driving the rally, with companies like Tokyo Electron, SoftBank, and Fast Retailing leading the way.
However, concerns about peak valuations and the sustainability of the rally have been raised by analysts. High-quality stocks are trading at expensive ratios, and there are worries about potential underperformance in an economic downturn. The Bank of Japan’s plans to raise interest rates from negative levels are seen as a positive sign, indicating a shift towards inflation after years of deflation.
Investors looking to capitalize on the Japanese market can consider ETFs like the iShares MSCI Japan ETF and the iShares JPX-Nikkei 400 ETF. The tightening monetary policy and positive economic indicators are expected to continue driving the market rally, with forecasts suggesting further growth in the coming months.
