Japan’s Nikkei 225 index has risen by 56% since the start of 2023. It went on to an all-time high in March 2024, surpassing the previous record set in 1989. Foreign inflows into Japanese stocks topped ¥6.2 trillion ($43.4 billion) in 2023, breaking a record that hasn't been touched since at least 2014.
While the shift in global investor portfolios from China to other Asian countries has undoubtedly played a role, the Tokyo Stock Exchange’s (TSE’s) own reform, focused on prompting change at companies struggling with low share prices at persistently low price-to-book ratios (PBRs) has been the key driver behind Japan's resurgent capital market.
Beyond stock performance, “the reform has been instrumental in reviving the real economy”, Eisuke Sakakibara, Japan's former vice-minister of finance for international affairs, known as 'Mr. Yen,' tells Euromoney.
With inflation consistently hitting its 2% target and wage growth outpacing that, the Bank of Japan’s abandonment of negative interest rates signals the country's emergence from its lost decades and a return to growth.
Some argue that Japan’s recent progress can be traced back to the ambitious Abenomics reforms of the early 2010s. But the real turning point came in 2023 with the formation of the so-called Council of Experts.
