Japan's re-emergence as an investment destination

On February 22, 2024, the Nikkei 225 closed at 39,098.68, breaching the previous record set on December 29, 1989. The comeback took longer than Wall Street's recovery from the crash that sparked the Great Depression and marked a rebirth of investor interest in Japan's equity market. The index reached a low of around 7,000 during the financial crisis of 2008. Japan's equity markets formed the biggest asset bubble in history in 1989. This time around, the rise may be more sustainable. However, domestic investors continue to remain sceptical. Let's explore why. Domestic investors are still wary Foreign investors have been buyers in the rally, accounting for almost 70 per cent of the trading in TOPIX. According to a Bloomberg report, foreigners now hold 30 per cent of Japanese stocks, up from 5 per cent in 1989. Despite changes to the Nippon Individual Savings Account (NISA) program, domestic players have been sellers, which provides tax incentives for long-term individual investment. Launched in 2014 to encourage households to shift their financial assets from savings to investments, the program has been expanded in 2024 and made more f

This article was originally published on April 01, 2024.