Tokyo: On the last trading day of the year, Japanese shares posted their best annual performance for more than four decades, leaving other major markets in the dust.
Foreign investors piled into the long-laggard market in 2013 as the government and central bank unveiled measures aimed at stoking the world’s third-largest economy that sent the yen plummeting against the dollar and cheered exporters.
Prime Minister Shinzo Abe — who rang a bell at the Tokyo Stock Exchange to mark the final trading day — has been widely praised for reviving confidence but analysts say more needs to be done.
Tokyo’s benchmark Nikkei 225 index finished Monday up 0.69 per cent at 16,291.31, about 57 per cent higher than its 2012 close of 10,395.18.
That marked the Nikkei’s best annual return since it nearly doubled in 1972, outpacing a booming Wall Street which has seen the Dow and S&P 500 power to record highs.
The broader Topix index of all first-section shares, up 0.95 per cent on the day to 1,302.29, skyrocketed nearly 52 per cent from a year ago.
“This has been a boom year — it’s been a long time since we’ve seen such a robust performance,” said Hikaru Sato, a senior technical analyst at Daiwa Securities.
The Japanese currency has lost about a fifth of its value against the greenback since the start of the year, giving Japanese exporters a much-needed boost.
The weaker unit makes firms more competitive overseas while making their overseas earnings worth more in yen terms when repatriated.
In afternoon Tokyo trade the dollar bought 105.35 yen, well up from the 87 yen level at the end of last year.
The unit’s decline helped push Sony shares to 1,826 yen, nearly double from a year ago, as the embattled electronics giant repaired its battered balance sheet, while Toyota stock soared 60 per cent to 6,240 yen.
Japan’s biggest bank Mitsubishi UFJ rose 50.5 per cent and shares of Uniqlo operator Fast Retailing almost doubled to 43,400 yen.
Shares in mobile carrier SoftBank, which took control of US-based Sprint Nextel in a headline-grabbing $21.6 billion deal this year, almost tripled to 9,200 yen.
Despite the huge gains, the Nikkei remains a shadow of its former self. The market peaked at almost 39,000 in the last days of 1989 before Japan’s asset bubble popped, dealing a huge blow to the economy and sending the Nikkei plunging over the next two decades.
And despite the upbeat mood in the market, fuelled by a strong pick-up in the US economy and improvements domestically, traders have mixed feelings about what to expect in 2014.
While the most bullish say Abe’s big-spending policy blitz is a key confidence driver, some offer a word of caution.
“I expect the Nikkei to rise to the 20,000 level next year,” said Seiichi Suzuki, market analyst at Tokai Tokyo Securities.
“Abenomics has contributed a lot to the market in terms of risk sentiment.”
Major Japanese brokerage house Nomura Securities was more cautious, saying it expects the Nikkei to see-saw through the year before ending at around 18,000.
“We keep our view that Japanese share prices will remain on an upward trend next year, on the back of an increase in companies’ profits and expectations for Abenomics,” it added.