Japan Has a Long History of Disappointing Investors. Why This Rally Might Be Different.
TOKYO—Japan’s stock market has ripped higher this year. Money managers think that this time, the gains might actually last. Corporate policy changes pushed by the country’s stock exchange, an endorsement from Warren Buffett and relatively low valuations have helped Japanese stocks become one of the best-performing markets in the world this year.
The country’s Topix index is up 25% through Friday. That puts it ahead of the S&P 500, which is up 16% over the same period; the Stoxx Europe 600, which is up 7%; and the Shanghai Composite, which is up less than 1% in 2023. Those skeptical of the rally point out that Japan, the world’s third-largest economy, has had a long history of disappointing investors.
Its stock market hasn’t hit a record since 1989, the year the Berlin Wall fell. After a bubble in Japanese real estate and financial markets burst, economic growth took such a prolonged hit that historians and investors referred to the period that followed in the 1990s and early 2000s as Japan’s “lost decades." Yet these days, many investors and analysts believe things could turn out differently. The country’s economy is growing.
Deflation, which for decades kept wages low and stifled corporate investment, has seemingly receded: Inflation has run at or above the Bank of Japan’s 2% target since last year. Foreign investors are taking note. Banks from Goldman Sachs Group to JPMorgan Chase say they are getting more phone calls and emails from clients expressing interest in investing in Japan.
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