Driven by chip-related heavyweight stocks and supported by large foreign purchases, the Nikkei Index rose 44% in the fiscal year ending Friday, the biggest annual increase since the fiscal year ending March 2021. Furthermore, the index hit record highs one after another this month, breaking the highest level since Japan's bubble economy in 1989 on February 22.

By Friday's close, the Nikkei Index closed up 0.5% to 40,369.44 points, recovering some of the previous trading day's losses.

Among them, chip-related heavyweight stocks such as Tokyo Electronics and Edwin Test Systems rose 0.79% and 1.85%, respectively, which helped push the Nikkei Index to new highs.

Meanwhile, the real estate sector rose 1.96% and increased 16% this month, the biggest increase among all sectors. According to reports, a government survey released this week showed that in 2023, land prices in Japan rose at the fastest rate in 33 years, supporting this sector.

Furthermore, the rise in the Japanese stock market was supported by two sources: first, foreign investors bought it due to the weakening yen, and second, the market expected that the Bank of Japan would continue to implement a loose monetary policy.

This week, the yen fell to a 34-year low against the US dollar, prompting local officials to hold an emergency meeting. This is a sign that Tokyo may interfere in the market.

However, when the Japanese yen weakens, the cost in dollars or other major currencies will decrease, which makes the Japanese stock market more attractive to foreign investors. As a result, they are likely to increase their investment in the Japanese stock market, thereby boosting the stock price.

Fumio Matsumoto, chief strategist at Okasan Securities, said, “Investors are wary of possible intervention in the money market, but overall they think the weak yen is a positive factor for the domestic stock market.”

Second, the current market anticipates that the Bank of Japan will continue to implement a loose monetary policy, which means that the market expects interest rates to remain low. This policy environment generally has a positive impact on the economy and the stock market by reducing capital costs and encouraging businesses and individuals to invest and consume more.

Fumio Matsumoto of Okasan Securities said that the market's optimistic expectations that the Bank of Japan will not raise interest rates quickly supported the stock price.

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