On Monday, Japan’s Nikkei 225 index continued its upward trajectory, opening at record highs and extending the robust performance from the previous week. Investors displayed strong interest in local stocks, driven by enthusiasm surrounding artificial intelligence (AI) and the expectation of prolonged ultra-low interest rates.
The Nikkei 225 witnessed a 0.6% rise, reaching a new record high of 39,420.0 points. This marked the second consecutive session of achieving record highs, building on the momentum from the substantial rally observed last week. The index is now approaching the significant 40,000-point level, raising the potential for further upside.
The substantial gains on the Nikkei were, in part, a result of catch-up trade, as Japanese markets were closed for a three-day weekend. The rally was particularly propelled by the strength exhibited in heavyweight technology and chipmaking stocks. The tech sector experienced renewed vigor following NVIDIA Corporation’s (NASDAQ: NVDA) consensus-beating earnings and optimistic guidance. The positive outlook for demand in chips and technology, driven by increasing AI development, contributed to the bullish sentiment.
Beyond the tech sector, broader Japanese shares were buoyed by the expectation of monetary conditions remaining ultra-dovish for an extended period. The Bank of Japan indicated a gradual departure from ultra-low interest rates. This stance, coupled with the yen’s proximity to its weakest level in 30 years, attracted foreign investors to Japanese assets.
Data released on Monday revealed that Japanese corporate services price index inflation, a leading indicator for consumer inflation, grew less than anticipated in January. This outcome foreshadows a similar reading expected from consumer inflation data later in the week. Weaker inflationary pressures reduce the urgency for the Bank of Japan to initiate a tightening policy, creating more favorable conditions for Japanese stocks.
The broader TOPIX index also experienced gains, rising by 0.4% to 2,671.69 points, concurrently setting a new record high.