Japanese stocks experienced a notable upswing as the Nikkei index climbed 1.53% to close at 38,868.68, marking its highest point in over a week. This gain was fuelled by positive signals from the US economy, which bolstered market sentiment in Japan. The Nikkei’s performance aligned with similar gains on Wall Street, underlining the significant influence of international markets on Japan’s economy, which currently lacks strong domestic drivers. Among the top performers were Fast Retailing, which recorded a 2.9% increase, along with tech leaders Tokyo Electron and SoftBank Group, both of which posted solid gains. However, concerns linger about the potential impact of President-elect Donald Trump’s trade policies on Japanese exporters, casting some uncertainty over the market’s future trajectory.
The optimism in Japan’s market stems from a broader rally in US stocks, which has had a ripple effect across global markets. Despite apprehension surrounding potential policy shifts under the Trump administration, these gains have inspired confidence in Japanese indices, including a 1.02% rise in the Topix. Technology and retail sectors led the charge, with a significant 71% of stocks on the Tokyo Stock Exchange’s prime market seeing gains.
Japan’s economic performance remains deeply intertwined with global market trends, with the US playing a central role. The recent rally underscores the nation’s dependency on external economic shifts, particularly from the US, which raises questions about the resilience of Japan’s export-driven economy. Addressing these vulnerabilities by focusing on domestic growth and diversification will be crucial to ensuring long-term stability and reducing reliance on unpredictable global developments.
The Nikkei’s latest surge reflects the influence of international economic movements on Japan’s stock market. While positive signs from the US have bolstered investor sentiment, the need for a stronger domestic foundation to mitigate external risks remains evident.
Fidelity Japan Trust PLC (LON:FJV) aims to be the key investment of choice for those seeking Japanese companies exposure. The Trust has a ‘growth at reasonable price’ (GARP) investment style and approach – which involves identifying companies whose growth prospects are being under-appreciated or are not fully recognised by other investors.
