Japan’s Stock Market Rebounds Near Record Highs Amid Yen Volatility

Japan’s equity markets have clawed back losses from last year’s dramatic downturn, with the Topix index now trading NEAR all-time highs. The recovery follows a 12% plunge in August 2024 after the Bank of Japan unexpectedly raised interest rates, wiping out $670 billion in market value. This time, clearer central bank communication, corporate reforms, and favorable US trade terms are bolstering investor confidence.

Pelham Smithers, a UK-based Japan equity analyst, notes, "The environment feels more stable for sustained growth. There’s room for further rate hikes—a scenario that previously seemed untenable." The yen remains a wildcard: a 2% surge against the dollar last Friday, triggered by weak US jobs data, briefly pressured stocks. As of Tuesday morning in Tokyo, the currency hovered at ¥146.75 per dollar, with the Nikkei 225 and Topix dipping slightly.

While parallels exist to last July’s failed rally, the current uptrend appears more resilient. Traders are cautiously optimistic, though yen-driven volatility lingers as a reminder of 2023’s 10% monthly currency swing and its market fallout.