Nikkei and TOPIX Both Hit 'All-Time High'... "Yen Weakness and US Stock Market Tailwind"

TOPIX Hits Highest Level in 34 Years
Exporters' Strong Performance Expected Amid Yen Weakness

Japan's representative stock indices, the Nikkei 225 and TOPIX, both reached record highs on the 4th. The strong performance expectations for Japanese export companies and former President Trump's fiscal policy pledges are seen as tailwinds for the stock market.

The Nikkei index closed at 40,913.65, up 0.82% from the previous session. It surpassed the previous record closing high of 40,888 set on March 22, marking a new high in about three months. On the same day, TOPIX closed at 2,898.47, up 0.92% from the previous session, surpassing the highest level of 2,884.80 set in December 1989 during the bubble economy era for the first time in 34 years.

[Image source=AP Yonhap News]

The market rise was driven by large-cap stocks. This reflects the impact of continued record yen weakness and strong performance expectations for export-oriented companies. Toyota Motor, which has held the world's number one new car sales position for four consecutive years until last year, saw its stock price rise about 2%. Semiconductor and electronics company Keyence and Mitsubishi Corporation, a general trading company, also rose 1.13% and 1.44%, respectively. SoftBank Group's stock price jumped nearly 5%, reaching its highest level in about 24 years since February 2000, during the height of the dot-com bubble.

Daiki Aoki, Chief Investment Officer at UBS Sumitomo Trust Asset Management, said, "The recent strength in the Japanese and U.S. stock markets reflects corporate earnings tailwinds and former President Trump's policy pledges. The U.S. tax cuts, fiscal expansion, and accommodative financial environment will benefit not only U.S. companies but also Japanese companies."

There is also a view that the launch of Trump's second term is a positive factor for Japanese value stocks. Takayuki Ishibashi, Vice President at Goldman Sachs, noted, "When former President Trump was elected in 2016, U.S. interest rates rose, and value stocks such as capital goods and steel attracted attention in the stock market. Japanese stocks have low PBR (price-to-book ratio) and a relatively high proportion of value stocks that benefit from rising interest rates, making them highly favored by investors."

There are optimistic forecasts as well. Chihiro Ota, Deputy General Manager of Investment Research at SMBC Nikko Securities, said, "Many export-related Japanese companies issued conservative earnings forecasts in April and May. If the dollar income earned overseas by export companies begins to be reflected in their earnings, there is room for further stock market gains."