Japan’s Nikkei 225 index passes record high after 34 years

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Japan’s main stock market index has climbed past its all-time high after a 34-year wait, exceeding the record level reached during the country’s late-1980s asset bubble.

The Nikkei 225 index of the biggest Japanese companies passed its 38,915-point record close during intraday trading on Thursday. It capped a powerful rally during 2024, driven by rises in chip-related stocks.

Takeo Kamai, head of execution services at CLSA in Tokyo, described a mood of “euphoria and surprise” on the trading floor as the number appeared on screens, adding that the final spurt over the line followed strong earnings results from US chipmaker Nvidia overnight.

The latest gains carried the benchmark index above its level on the final trading day of 1989, when 15 Japanese companies ranked among the world’s 20 biggest by market capitalisation.

The Nikkei has risen 16.6 per cent since the start of the year, making it the world’s best-performing major index, as a falling yen lures foreign investors. A weak currency boosts the profits of the export-focused companies that have a heavy weighting among Tokyo stocks.

Money has also flowed into Japanese stocks as investors have pivoted away from China’s markets because of its slowing economy and geopolitical tensions.

The gains in Japan also follow an influx of investment by domestic households taking advantage of a new government subsidised savings scheme.

The peak attained in 1989 has sometimes been referred to by Tokyo traders as the “iron coffin lid”, with its apparent unattainability becoming a symbol of the three and a half decades of economic stagnation that followed the bursting of Japan’s stock and property bubble.

“It’s an incredibly important barrier for Japan to have finally broken through,” said Bruce Kirk, chief Japan equity strategist at Goldman Sachs.