Japan’s Nikkei pushes to fresh 34-year peak as chip shares climb

By Thomson Reuters Feb 14, 2024 | 9:25 PM

By Kevin Buckland

TOKYO (Reuters) – Japan’s Nikkei share average rallied to the highest level in 34 years on Thursday, as chip-related shares tracked overnight gains on Wall Street peers.

The benchmark stock index was also supported by a weak currency, which boosts the outlook for exporters, amid a continued outlook for dovish monetary policy as Japan unexpectedly slipped into a recession at the end of last year.

The Nikkei rose as high as 38,127.85 for the first time since January 1990 – when the so-called “bubble economy” was just starting to deflate – before entering the midday recess at 37,948.35, up 0.65% from the previous close.

The Nikkei marked a record high of 38,957.44 on Dec. 29, 1989, the final trading day of that year.

“I can’t believe we’d come this far and not have a look at those all-time highs,” said Tony Sycamore, a markets analyst at IG, flagging the potential for a test of the level by end-March.

“Into the Japanese financial year-end, the Nikkei generally does well,” he said. “But if it misses out, then we’ll have to look towards the middle of the year,” with the Nikkei tending to retreat at the start of the new fiscal year in April, he added.

On Thursday, chip-related shares provided the Nikkei with an outsized lift, taking cues from a 2.2% jump in the Philadelphia SE Semiconductor Index overnight, outpacing rallies for the main three Wall Street benchmarks.

Chip-making equipment giant Tokyo Electron contributed the most: 133 index points with a nearly 4% jump. Artificial intelligence-focused startup investor SoftBank Group provided a 49-point boost with a 3% rise.

Corporate earnings produced some outsized winners and losers, with green energy company Ebara and e-commerce company Rakuten Group each surging nearly 16%. Toy company Bandai Namco tumbled more than 15%.

The yen’s slide below 150 per dollar this week has been broadly supportive, as it boosts the value of overseas revenues and makes products more competitive.

The Japanese currency has been weighed down by comments from top Bank of Japan officials that even if negative short-term interest rate policy is removed in coming months, further rate hikes are likely to be slow.

The timing of any policy tightening was further complicated on Thursday by the release of data showing the economy slipping into a recession.

“If we get a 10 basis point rate hike in April, that’s not going to change anything for the Nikkei,” said IG’s Sycamore.

“When you look at the bigger picture, it all looks good.”

(Reporting by Kevin Buckland; Editing by Mrigank Dhaniwala)