After the Japanese Yen depreciated to its lowest point since 1986 against the US Dollar on Friday, June 28, the Japan East Index soared to its highest point in 34 years. Bank stocks rose as domestic bond yields gradually increased, and technology stocks rebounded from the sell-off the previous day.

The Dongzheng Index reached a 34-year high.

At the close, the Dongzheng Index rose 0.57% to 2,809.63 points, previously reaching the highest point since the January 1990 bubble burst, 2,821.86 points. The value stock sub-index rose by 0.9%, surpassing the growth stock's 0.22% growth rate. #Japanese market#

The country's most widely used stock index rose to 2821.86 points, higher than the peak on March 22nd, approaching the highest closing point since January 1990. This puts it just 2% away from the historical all-time high set the previous year, and the Nikkei 225 index of blue-chip stocks reached this milestone earlier this year.

Value stocks such as banks and insurance companies led the gains, with the indexes of the two sectors rising by at least 2.5%, while the yield on 10-year bonds continued to exceed 1%. Inflation data for June in Tokyo was released early Friday morning, with the inflation rate rising, which could make potential interest rate hikes a topic of discussion at the Bank of Japan's July meeting.

"It is possible for the Topix to reach a new historic high within a week," said Ryoutarou Sawada, senior analyst at Tokai Tokyo Intelligence Laboratory Co. Variations in interest rates could support financial stocks, and if cross-shareholdings were further reduced to increase returns, "this could boost stock prices."

Since mid-April, bank stocks have made a significant contribution to the Topix rebound, as the expected higher interest rates will increase their profitability. More companies have also increased dividends and announced stock buybacks at a record pace.

"In the past three months, large-cap value stocks have shown relatively strong performance. Expectations remain high for Japanese companies that manage their business with cost consciousness," said Masahiro Ichikawa, chief market strategist for Sumitomo Mitsui DS Asset Management Co.

Insurance and banking are the top-performing industries on the Tokyo Stock Exchange, rising 2.71% and 2.44%, respectively.

The Nikkei index, which has a higher proportion of technology stocks, rose 0.61% to 29,583.08 points, recovering Thursday's 0.82% decline. Stocks related to chips and artificial intelligence (AI) were the big winners in the Nikkei index.

SoftBank Group, an AI-focused venture capital firm, rose 2.52%, becoming the largest point gain in the index. Chip test equipment maker Advantest and peer Lasertec followed, rising 3% and 3.2%, respectively.

The best-performing stocks in the Nikkei 225 index on this trading day are:

Sumitomo Dainippon Pharma Co. Ltd. (TYO:4506), up 8.00% or 30.00 points to close at 405.00 points;

Ebara Corporation (TYO:6361) rose 7.32% or 173.50 points to 2,543.50 points;

IHI Corporation (TYO:7013) rose 5.91% or 268.00 points in late trading, closing at 4,805.00 points.

The worst-performing stocks on this trading day are:

Hino Motors, Ltd. (TYO:7205), down 5.43% or 24.00 points to close at 418.00 points;

Shiseido Company, Limited (TYO:4911) fell 4.95% or 239.00 points to close at 4,588.00 points;

Sharp Corporation (TYO:6753) fell 4.76% or 46.50 points to close at 930.10 points.

Of the constituent stocks of the Nikkei 225 index, 148 rose and 76 fell, while 1 remained unchanged.

Beware of the PCE storm.

However, Maki Sawada, a stock strategist at CSI All Share Investment Banking, said that investors remained cautious about the upcoming release of the closely watched U.S. inflation indicators later in the day and the important French elections this weekend.

"It's difficult to chase the Nikkei index higher with these events coming up," she said.

The benchmark 10-year Japanese government bond yield fell one basis point to 1.06%, but is still set to rise by nine basis points this week. On Thursday, the yield hit 1.08%, the highest level this month.

The yen fell to its lowest level against the dollar in 38 years, adding to bets that the Bank of Japan will raise interest rates again at its July policy meeting as Tokyo consumer price data heated up the market.

A weaker yen helps exporters by increasing their repatriated profits. Iwai Cosmo Securities said: "As the yen weakens further, Japanese stocks continue to rise."

Although the weaker yen has helped exporters, recent exchange rate levels have raised concerns about the negative impact on import costs and consumer sentiment, and increased the possibility of official intervention to boost the currency. Inflation expectations have risen to their highest level since at least 2004, providing a reason for the central bank to raise interest rates.

The Japanese Ministry of Finance spent ¥9.79 trillion ($61 billion) supporting the yen between April 26 and May 29.

However, analysts now say that traders may continue to test and see at which point the government takes action, with some calling for the yen to fall to 170.

Since Russia's invasion of Ukraine in February 2022, the yen has fallen from around 115 to its current level near 161. This plunge is partly due to the Bank of Japan maintaining ultra-low interest rate policies to support the economy, while other central banks have raised interest rates.