Japan stock market is back after 34 years: Tokyo’s Nikkei closes at highest level since the 1980s boom

Japan’s main stock index soared to a new high yesterday, breaking the previous record which was set 34 years ago.

Tokyo’s Nikkei rose 2.19 per cent on Thursday to close at its highest level since the 1980s boom.

The blue-chip index closed at 39,098.68 beating the previous all-time high of 38,915.87 reached on the final trading day of 1989.

Less than three years after that record was set, the index of the 225 biggest Japanese stocks lost 60 per cent of its value.

In 1992, the bubble of high property and share prices burst and was followed by a long period of economic stagnation and deflation known as the ‘lost decade’.

But the fallout from the crisis was not confined to ten years, and some argue it is still being felt in the present day.

A new record high showed the Nikkei has ‘finally thrown off its shackles’, analysts said.

Hargreaves Lansdown head of money and markets Susannah Streeter said: ‘The Nikkei has refound its mojo – but it’s been a long time coming’.

The index was buoyed yesterday by a rally in Asian tech stocks sparked by better-than-expected results from the US chip manufacturer Nvidia.

It followed corporate governance reforms that have made Japanese businesses more shareholder-friendly.

That has encouraged international investors including billionaire businessman Warren Buffett, who has been bullish towards Japanese stocks.

The Berkshire Hathaway chairman and chief executive has holdings in five businesses including Mitsubishi, a traditional Japanese conglomerate which makes cars but also has a banking arm and energy division.

The stock market rally also followed a string of strong results from companies that are listed on the Nikkei index.

And exporters like Toyota and Sony have been buoyed by a weaker yen.

Lindsay James, an investment strategist at Quilter Investors, said: ‘This is a market that has finally thrown off its shackles and is now ripe for increasing attention from international investors.’

Shinji Ogawa, co-head of Japan cash equities sales at JP Morgan in Tokyo, said: ‘The number of incoming requests into my team are literally exponential the last few months.

‘It’s overwhelming how much demand or interest there is in Japan at the moment.’

AJ Bell investment director Russ Mould added: ‘Company valuations are attractive versus the US.

‘There is the potential to get a growing stream of dividends thanks to a structural shift in the country for corporates to be more shareholder-friendly.’

The stock market rally came despite official figures that last week showed Japan had unexpectedly slipped into a recession at the end of last year.

The country’s economy shrank by 0.4 per cent in the final three months of last year.

That figure followed a contraction of 3.3 per cent in the previous quarter.

And Germany knocked Japan from its position as the third-biggest economy in the world.