Japan's Stock Market Hits 34-Year High

- The Nikkei 225 index surpassed the 58,000-point level for the first time on February 12, 2026, marking a significant rally. This surge followed a landslide election victory for Prime Minister Sanae Takaichi's Liberal Democratic Party, which secured a supermajority in the lower house, increasing expectations for aggressive government spending and economic stimulus. - A key driver of the market's performance is a wave of corporate governance reforms encouraged by the Tokyo Stock Exchange (TSE). These reforms pressure companies to improve capital efficiency and shareholder returns, particularly those with low price-to-book ratios. This has led to a notable increase in share buybacks, which were expected to reach JPY18 trillion in 2025. - Foreign investors have been a major force in the market, accounting for nearly 70% of the trading volume in Japanese stocks. Their confidence was notably boosted by Warren Buffett's increased investment in major Japanese trading firms. There has also been a diversion of investment from China to Japan due to concerns about the Chinese economy and geopolitical risks. - The weakening of the yen has also played a significant role, making Japanese exports more competitive and increasing the yen-denominated profits of companies with large overseas operations, such as Toyota and Sony. This is partly due to the interest rate differential between Japan and the United States. - The rally is also supported by the global boom in AI and technology. Several Japanese companies are seen as leaders in integrating AI into their operations, attracting investor interest in sectors like semiconductors and AI-related technologies. - This peak surpasses the previous record set during Japan's asset price bubble in December 1989, when the Nikkei reached an intraday high of 38,957.44. The market's recent performance is seen by some as a potential end to Japan's "lost three decades" of economic stagnation.