Japan’s Topix rose, headed for its highest close since August 1990, as foreign buying and locally driven corporate governance improvements lift stocks to levels not seen since the nation’s bubble economy burst.
The benchmark climbed as much as 0.5% to 2,126.14, with solid earnings at companies focused on domestic demand adding to bullish sentiment. The Topix is beating the S&P 500 this year, with further tailwinds from a resumed weakening of the yen amid the Bank of Japan’s continued easy-money policy.
Solid fundamentals and expectations for structural changes “justify a bullish stance” on the nation’s equities, Goldman Sachs Group Inc. strategists Kazunori Tatebe and Bruce Kirk wrote in a note. The economic outlook for Japan is strong given positive factors including an inbound recovery, plans for robust capital expenditure and ongoing BOJ easing, they wrote.
Rally in Japan Has Another Catalyst in Earnings: Taking Stock
Warren Buffett’s renewed endorsement of Japanese stocks has provided hope that foreign investment is returning. Overseas traders bought a net $22 billion worth of the nation’s stocks and futures in April, amid record levels of inflows.
At the same time, a flurry of buybacks is supporting sentiment after the Tokyo Stock Exchange called on companies that are trading below book value to outline capital improvement plans. Dai-Ichi Life Holdings Inc. shares jumped on Monday after it announced plans to repurchase as much as 120 billion yen ($882 million) of its stock, while Japan Post Holdings Co. said it will buy back up to 10% of its shares.
