Continuing upward trend reflects mounting expectations for corporate reforms
The Nikkei Stock Average reached 30,900 yen on Friday, hitting its highest level since 1990. (Photo by Satoko Kawasaki)
AKIRA KITADO, Nikkei staff writerMay 19, 2023 09:28 JSTUpdated on May 19, 2023 15:42 JST
TOKYO — The Nikkei Stock Average closed at 30,808.35 on the Tokyo Stock Exchange on Friday, up 234.42 yen, or 0.77%, from the previous day, reaching its highest level since August 1990.
The average reached its highest point since Japan’s bubble economy collapsed more than 30 years ago, surpassing the previous post-bubble peak of 30,670.10 reached in September 2021.
Strong corporate earnings and expectations for improved capital efficiency and shareholder returns are propelling Japanese equities higher, helped by favorable macroeconomic factors such as the cheap yen and continuing monetary easing by the Bank of Japan.
Blue-chip shares like fast fashion brand Uniqlo’s operator Fast Retailing and robot manufacturer Fanuc contributed to the gains, both ending the day 2.2% higher.
The Nikkei average rose from 30,847.36 at the open Friday and touched 30,924.57 soon afterward. The average has been on the upswing for the last six days, topping the 30,000 mark on Wednesday.
The bull run has pushed the Nikkei average past where it stood when the bubble economy collapsed. At the peak of the economic boom in December 1989, Japan’s benchmark stock average hit an all-time high of 38,915.87 before plummeting back to earth.
The average hit its post-bubble nadir of 7,054.98 in March 2009 during the global recession triggered by the collapse of Lehman Brothers in 2008.
Share prices began recovering with the introduction of massive monetary easing, the signature policy of Haruhiko Kuroda, who became governor of the Bank of Japan in 2013. In September 2021, the first autumn of the COVID-19 pandemic, the Nikkei average hit a high of 30,670.10.
“Economic conditions have been stable in Japan, compared with the U.S. Also, many companies are attracting attention from foreign investors by improving shareholder returns and announcing reform plans,” said Kazunori Tatebe, Japan equity strategist at Goldman Sachs.
The TSE’s request for improvements from companies with price-to-book ratios (PBRs) below 1X has incentivized them to reform their businesses and review their market policies.
Among them is Dai Nippon Printing, whose market capitalization hit some 1.25 trillion yen ($9 billion) in early March, up nearly 50% from about 840 billion yen at the end of 2022, after announcing plans to raise its PBR.
Its rival Toppan’s shares also reached a high for the year on Thursday, following its announcement of a 100 billion yen share buyback to take place over the next three years.
While there are concerns over the uncertain global economic outlook, Tatebe expects “the U.S. economy will be able to avoid going into a recession and having negative impacts on the Japanese stock market.” He added, “More and more companies will meet expectations for consistent corporate reforms in the medium and long term, which could push up the [Nikkei] average to the next level.”