Japan's Topix stock index rose to its highest level since August 1990, driven by foreign buying and corporate governance improvements. The benchmark climbed 0.6% to close at 2,127.18, with solid earnings at firms focused on domestic demand adding to bullish sentiment.
The Topix is beating the S&P 500 this year on further tailwinds from a weakening of the yen amid the Bank of Japan’s continued easy-money policy. A renewed push by corporates to increase buybacks and focus on investor returns is helping boost sentiment after the Tokyo Stock Exchange called on firms that are trading below book value to outline capital improvement plans.
Dai-Ichi Life Holdings Inc.'s shares jumped on Monday after it announced plans to repurchase as much as 120 billion yen ($882 million) of its stock.
"The economic outlook for Japan is strong given positive factors including an inbound recovery, plans for robust capital expenditure, and ongoing BOJ easing," said Haruki Takahashi, chief economist at Mizuho Research Institute.
The Tokyo Stock Exchange’s broadest index, the Topix, closed Tuesday at its highest end-of-day level since 1990. The index rose 0.58% to reach a record high of 2127.18 points at Tuesday's close — the highest level since August that same year.
Investors are buying Tokyo shares more actively due in part to expectations for higher corporate governance standards and other positive economic signs such as recent growth in wages.
"The Nikkei Stock Average is also on the verge of reaching the critical milestone of breaking through the psychological barrier of crossing over into uncharted territory not seen since September last year," said Keiko Kondo, senior market analyst at Nomura Securities Co., Ltd.
Japanese companies have issued relatively conservative earnings forecasts for the current fiscal year, which ends March 2024. However, analysts believe that these forecasts may be revised upward in light of improving economic conditions and stronger market sentiment.
"Investors are becoming more optimistic about Japan's equity market as corporate earnings continue to improve," said Akihiro Murakami, a strategist at Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
As the Topix index continues to reach new heights, analysts expect further growth driven by improvements in corporate governance standards and increasing foreign investment.