Japan's Nikkei crosses 39,000 as robust earnings, investor-friendly measures drive risk-on sentiment

Japan's Nikkei 225 hit a record high Thursday, powered by banking, electronics and consumer stocks as robust earnings and investor-friendly measures fuel a blistering rally in Japanese equities this year.

The Nikkei 225 jumped nearly 2% to hit 39,029, surpassing the previous record high of 38,915.87 reached in 1989.

Both the Nikkei and the broader Topix have been standout outperformers in Asia Pacific, up more than 10% so far this year after surging more than 25% in 2023 — their respective best annual gains in at least a decade.

Japan Inc's solid third-quarter corporate earnings have prompted Bank of America equity strategists to upgrade their 2024 year-end forecasts for the Nikkei 225 to 41,000 from 38,500. They raised their forecasts for the Topix to 2,850 from 2,715.

The rally has also been supported by a weaker yen, which has shed about 6% against the dollar so far this year and seems on track to drop to to 33-year lows touched late last year.

Investors have been pouring funds into Japanese equities, taking the lead of Warren Buffet's bullish calls on Japan and cheering the Japanese government's push towards greater corporate governance reforms — with the aim of compelling Japan Inc to boost shareholder returns.

Data from the Tokyo Stock Exchange showed foreigners invested more than 2 trillion yen in the exchange's "prime" offerings — its largest and most liquid stocks — in January.

Nikkei reported last week net profits of listed companies in Japan for the fiscal year ending March 2024 could reach a record high for the third consecutive year.

This comes on the back of record quarterly earnings for the October-December period, which have increased 45% from the same period a year earlier and are 14% higher than consensus