Japan’s Nikkei hits all-time high, breaks 1989 bubble-era record

Published February 22, 2024
A visitor stands next to an electronic screen displaying Japan’s Nikkei stock prices quotation board as the average surged past an all-time record high scaled in December 1989, inside a building in Tokyo, Japan on February 22. — Reuters
A visitor stands next to an electronic screen displaying Japan’s Nikkei stock prices quotation board as the average surged past an all-time record high scaled in December 1989, inside a building in Tokyo, Japan on February 22. — Reuters

Japan’s Nikkei 225 on Thursday finally broke through a record high set just before the country’s asset bubble catastrophically burst in the early 1990s.

The index of blue-chip stocks hit a peak of 39,156.97, beating the record of 38,957.44 set in December 29, 1989, before easing to 39,098.68 points at the end of trading, its highest closing level.

By doing so the Nikkei finally broke through the levels seen during the boom years of 1985-1989 when it quadrupled in value and Japanese assets soared.

Tokyo property prices at the time were hundreds of times more than in Manhattan, golf club memberships would cost millions of dollars, and bankers would sprinkle gold dust into their drinks.

Flush with cash and aided by the strength of the yen, Japanese companies also went on an overseas shopping spree, with Sony taking over Columbia Pictures and Mitsubishi purchasing New York’s landmark Rockefeller Center.

Japanese investors became major buyers in the international art market, setting new records for Impressionist painters like van Gogh.

But a crash came in the early 1990s as investors fled in panic, with the Nikkei roughly halving in 1990 and real estate prices falling sharply.

This ushered in Japan’s “lost decades” of economic stagnation, deflation and ballooning national debt.

Its stock market was hit by global downturns such as the burst of the dot-com bubble in the early 2000s and the 2008-2009 financial crisis.

Recovery

Shares began gaining momentum again around 2013 and picked up speed in the past few years, growing 28 per cent in 2023 and around 17pc so far this year.

“Share prices are not so expensive compared to the ‘bubble’ years if you compare the data,” Asuka Sakamoto, chief economist of Mizuho Research & Technologies, told AFP.

On Thursday, the market was boosted by US chipmaker Nvidia’s bumper results released after Wall Street’s closing bell.

Japan overtook Shanghai in January to once again become Asia’s most valuable stock market in dollar terms.

Takahide Kiuchi, executive economist of Nomura Research Institute, said share prices have also been boosted by the Bank of Japan’s refusal to move away from sub-zero interest rates, which has kept the yen weak.

Rises in stocks are backed by “expectations that the cheap yen will continue given the Bank of Japan’s easing policies, which in turn will prompt a rise in prices and salaries”, Kiuichi wrote in a February report.

Even so, downward risks include less-than-expected salary rises, a tightening of the BoJ’s monetary policy as well as uncertainty about US interest rates, he noted.

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