could Nikkei scale its all-time peak?

After a tumultuous start to the year, Japan’s benchmark Nikkei 225 broke past the 35,000 mark for the first time since February 1990 and has been scaling new 33-year highs.

The rally in Japan’s equity market, which started on Jan. 5, has also seen the broad-based Topix hitting 33-year highs.

How long will this run last? Could the Nikkei cross its all-time high of 38,195 hit in December 1989?

Speaking to CNBC, Yeap Jun Rong, market strategist at IG Asia struck an optimistic tone, saying that “all stars seem to be aligned for Japan’s stock market.”

He said that subdued wage data and weaker household spending allow the Bank of Japan to maintain its ultra-accommodative policies for longer, boosting the country’s markets.

It allows equities to “continue basking in this supportive policy environment,” Yeap said, adding stocks have more upside to them due to several longer-term tailwinds including the corporate governance measures by the Tokyo Stock Exchange.

Among the steps TSX has taken is directing companies to “comply or explain” if they are trading below a price-to-book ratio of one — an indication a company may not be using its capital efficiently. CNBC

The exchange warned such companies could be delisted as soon as 2026.

In a note last week, the Bank of America called the Japan rally a “déjà vu,” comparing it with the Nikkei’s rise between April and June 2023.

“We see many similarities too with last year’s rally,” the BofA’s analysts said, adding that one factor that started last year’s rally was the highest Shunto wage hike in 30 years.

In 2024, the Shunto negotiations look increasingly likely to bring even higher increases, with one large company after another announcing sharp wage increases over the last few weeks.

The “cost-push inflation has been weakening,…