Semafor Signals
Japan’s Nikkei index hits level not seen since 1989
Insights from Nikkei Asia, the Financial Times, and the International Monetary Fund
The News
Japan’s Nikkei Stock Average closed at a high not recorded since 1989, just before the country’s economic bubble burst, marking a potential end to its so-called “lost decades.”
The stock average rose 836.52 points over the previous day to 39,098 — eclipsing the all-time high of 38,915.87 recorded in late December 1989.
SIGNALS
Geopolitical shift is partly responsible
The country’s investments sank in the 1990s as the U.S. took a tougher stance on Japan — then considered America’s biggest economic challenger — one financial analyst explained to Japanese outlet Nikkei Asia. When China then emerged as a technological rival to the U.S. in the 2010s, Washington shifted its focus, instead targeting Chinese companies that threatened American advancements. “The geopolitical headwind for Japan has turned into a tailwind,” said Tomoichiro Kubota, senior market analyst at Matsui Securities. Washington’s export controls on Chinese chipmakers might be fueling the market’s current climb: While Japan trails behind Taiwan and South Korea in semiconductor manufacturing, Japanese companies responsible for fabricating the high-powered chips led the stock market’s rally.
The end of Japan’s ‘lost decades’
The Japanese economy cooled through the 1990s and early 2000s, a period often referred to as the nation’s “lost decades.” After Japan’s economic bubble burst, the nation did not fully recover — something analysts believe is tied more to the government’s inability to manage the economic downturn. In the years since, stock traders have referred to the 1989 peak as an “iron coffin lid,” the Financial Times reported, a reference to the seeming inability of the country’s stock market to bounce back to such a high. “It’s an incredibly important barrier for Japan to have finally broken through,” Bruce Kirk, chief Japan equity strategist at Goldman Sachs, told the newspaper.
