The recent surge in Japan's stock market can be attributed to the record corporate earnings in the manufacturing sector, with listed Japanese manufacturers experiencing over 20% growth in net profits for the first three quarters of the fiscal year. The auto industry played a significant role in driving this growth.
Improvements in corporate governance have also improved the attractiveness of investing in Japanese companies, with the Tokyo Stock Exchange pressuring CEOs to enhance capital efficiency metrics and stock prices. This move is part of broader reform measures to attract more investor capital.
Nvidia's strong earnings report also impacted Japan's stock market as the chipmaker announced a revenue increase of 265%, highlighting the growing demand for chips fueling artificial intelligence. This trend underscores the strength of the U.S. economy and contributed to the positive sentiment in Japan's stock market.
Foreign investors have been flocking to Japan's equity market since the beginning of the year, with many reallocating their investments from China and the U.S. Low-cost passive investments linked to the Nikkei Stock Average have been popular among global investors newly entering Japan's market, further boosting the country's stock market.