The Nikkei 225 index in Japan reaches a historic milestone as it surpasses the 40,000 level, driven by the strength of technology stocks and positive economic data. Chipmaking and artificial intelligence sectors play a significant role in the rally, while resilient business spending and a cooling inflation rate support the bullish sentiment. The Bank of Japan is expected to maintain loose monetary policy, creating a positive environment for Japanese stocks.
Nikkei 225 Index Surges Above 40,000 on Tech Stocks and Positive Economic Data
( Credit to: Investing )
Japan's Nikkei 225 index reached a significant milestone on Monday as it breached the 40,000 level for the first time in its history. The surge was driven by the strength of technology stocks and positive economic data, which boosted sentiment towards the economy and the Bank of Japan.
Technology stocks, particularly those related to chipmaking and artificial intelligence, played a significant role in the index's rally. Advantest Corp., a chip testing equipment maker, saw a 3.7% jump in its stock price, nearing a record high. Tokyo Electron Ltd. also reached a three-year high, while SoftBank Group Corp. traded close to a three-year peak. The tech-driven rally on Wall Street, with the tech-heavy Nasdaq closing at a record high on Friday, further supported Japanese shares.
In addition to the tech sector's strength, positive economic readings added to the bullish sentiment in the Japanese market. Business spending remained resilient, leading to a larger-than-expected 16.4% increase in Japanese GDP for the fourth quarter. This defied the unexpected slowdown in economic growth and showcased the resilience of the Japanese economy.
Furthermore, the key inflation indicator in Japan unexpectedly dropped to a six-month low in February. This downward trend in inflation, along with the broader cooling in Japanese inflation, gives the Bank of Japan little reason to tighten monetary policy aggressively. While the central bank is still expected to raise interest rates from ultra-low levels by April, it is likely to maintain loose monetary conditions, creating a positive environment for Japanese stocks.
The combination of the tech sector's strength, positive economic data, and the likelihood of loose monetary policy has propelled the Nikkei 225 index past the 40,000 level. This milestone reflects the continued optimism and resilience of the Japanese market.
