After decades of languishing in the shadows, Japanese stocks have embarked on a remarkable resurgence, driven by a trifecta of factors: abundant capital, robust momentum, and promising signals of change in corporate Japan. This has propelled the Nikkei, Japan's benchmark stock index, to within striking distance of its all-time high.
The stock market rally has come as a welcome respite for Japanese investors, many of whom have been scarred by the devastating losses suffered during the collapse of Japan's "bubble economy" in the late 1980s. The recent gains have also stirred global investors into action, recognizing the missed opportunities and scrambling to seize the current momentum.
Underlying this surge are a number of favorable factors. Valuations are considered reasonable, with the Nikkei trading at a price-to-earnings ratio of 22, a far cry from the exorbitant levels seen in the late 1980s. Companies have also been implementing market-friendly measures such as stock buybacks, further boosting their attractiveness. Dealers and fund managers anticipate sustained inflows, leading brokerage analysts to upgrade their price targets.