Japan’s Nikkei ends at record high on Wall Street gains, weaker yen

Japan’s Nikkei share average closed at an all-time high on Friday, underpinned by record gains on Wall Street overnight and strength in automakers’ stocks on a weaker yen.

The Nikkei rose 0.18 per cent to end at 40,888.43, after hitting 41,087.75 earlier in the session to break an all-time intraday high.

The index, which crossed the 41,000 level for the first time, rose 5.68 per cent for the week and posted 22 per cent gain so far this year.

The broader Topix rose 0.61 per cent to 2,813.22. “The market had expected the yen would strengthen against the dollar in this quarter but that is not happening, which is positive for Japanese firms,” said Shuji Hosoi, a senior strategist at Daiwa Securities.

“The yen remains weaker as Japanese (government bond) yields are not expected to rise sharply. The Bank of Japan said it would keep its easy policy so the gap in yields between the US and Japan will not narrow.”

BOJ Governor Kazuo Ueda vowed to keep supporting the economy with ultra-loose monetary policy, in fresh comments after the central bank ended eight years of negative interest rates and other remnants of its unorthodox policy on Tuesday.

Expectations for the slow pace of the rate hike pushed the yen to a 4-month low, heightening the chance of yen-buying intervention by Japanese authorities.

A softer yen helps exporters as it increases the value of overseas revenue in yen terms when firms repatriate them to Japan.

Toyota Motor rose 1.92 per cent to become one of the biggest boosts to the Nikkei. Suzuki Motor jumped 3.63 per cent.

The index for automakers rose 1.72 per cent.

Tyre makers jumped 2.41 per cent, the most among the Tokyo Stock Exchange’s 33 industry sub-indexes. Chip-related Advantest slipped 2.93 per cent and Tokyo Electron inched down 0.03 per cent.

Japan’s government will continue to work closely with the Bank of Japan to conduct policy flexibly and beat deflation, a government report said on Friday.

The government also said it will “mobilise all possible policy means to transform the economy into a new growth-oriented economy,” according to the monthly report by the Cabinet Office.

The report comes after the Bank of Japan scrapped its radical policy and made its first rate hike in 17 years this week in a sign of confidence in the economy. Inflation has exceeded the BOJ’s 2 per cent target for well over a year and unionised workers recently won the biggest pay hikes in 33 years.

“The government and the BOJ will foster widespread awareness among the public that there will be no return to deflation, and lead to an end to deflation,” the report said.

The government also raised its view on capital spending for the first time since October 2022, saying it showed “movements of picking up,” the report showed.

The upgrade was made after revised data showed capital expenditure, one of the main components of the gross domestic product(GDP), was better than the preliminary reading in the fourth quarter of 2023.

Firms’ investments to shore up semiconductors and auto-related production appear to be behind the gains, the report said.

But the government also said imports were “weakening recently”, downgrading its view for the first time since January 2023.

Imports from Asia such as mobile phones and auto-related products weakened, while supply disruptions caused by a crisis in the Red Sea appeared to have led imports from Europe to decline.

Data this week showed imports rose just 0.5 per cent year-on-year in February versus the median estimate for a 2.2 per cent increase, though exports rose by a better-than-expected rose 7.8 per cent.

The overall economy was “recovering moderately though it appears to be stalling recently,” said the report, keeping the same wording from the previous month.

The government said the recovery in consumer spending appears to be pausing as new auto sales were weak due to the suspension of some auto production and shipments.

Meanwhile foreign investors continued to accumulate Japanese bonds for the third straight week ahead of a pivotal move by the Bank of Japan (BOJ) to exit negative interest rates after 17 years.

They pumped in a massive 2.16 trillion yen ($14.26 billion) into long-term Japanese bonds on a net basis last week, the biggest amount in a week since mid-March 2023, data from the Ministry of Finance showed.

Japanese short-term debt securities, meanwhile, witnessed about 1.16 trillion yen of foreign outflows, the first weekly net outgo in three weeks.

In a widely expected decision, the BOJ ditched its negative rate policy on Tuesday with its first interest rate hike in 17 years and ushered in a new era of monetary policy.