On the last trading day of this week, Japanese stocks continued to rise. As of the close, the Nikkei 225 index rose 3.6%, reaching 38062.67 points, a rebound of more than 20% from the low point on August 5, entering a technical bull market, and rose nearly 9% this week. The TOPIX index rose 3%. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.

Under the push of the yen's renewed weakness, Japanese stocks achieved their biggest gains since April 2020, and at the same time drove Asian stocks to their best week in a year.

A series of US data this week, from inflation to unemployment claims to retail sales, has reassured investors and supported the view that the world's largest economy is moving toward a "golden-haired girl" scenario, in which inflation is under control and growth is not stagnating. Traders have therefore re-entered risk assets, and Asian stocks have rebounded sharply following the US stock market, effectively wiping out last week's losses in global stocks.

Hebe Chen, an analyst at IG Markets Ltd., said: "With the recent economic data giving cause for optimism, Asian equities have regained a sense of 'perfect balance', making today's performance impressive. Especially the Japanese stock market, which continues to recover strongly and there is still no sign of slowing down."

The weakness of the yen may even attract some hedge funds to return to the carry trades that caused the disaster two weeks ago. Hiroshi Namioka, chief strategist at T&D Asset Management, said: "Exporters are benefiting from the weak yen and robust US economic data."

Foreign investors are buying stocks in Japan again after selling them off like never before.

The recent turmoil caused by the Bank of Japan's interest rate hike has created two records at lightning speed: last week, both the inflow and outflow in the Japanese stock market reached their historical highs.

In the week ending August 9, as trading recovered from historic collapse, global investors became net buyers of Japanese stocks. Preliminary data from Japan's Ministry of Finance shows total sales reached JPY 31.3 trillion ($210 billion), the highest since at least 2005; total purchases were JPY 31.9 trillion, also setting a record for the same period.

The Nikkei 225 index suffered a 12% plunge on August 5, the biggest drop since Black Monday in 1987, before rebounding 10% the next day. Net purchases last week were the first in four weeks, indicating that investors sold first and then bought back.

These figures highlight the strong demand among overseas investors for Japanese stocks, even after the closure of carry trades funded in yen rocked broader markets. Bruce Kirk, chief Japan stock strategist at Goldman Sachs, said foreign investors are seeking to buy Japanese equities.

Most of last week's selling was technical, not driven by fundamentals, unlike during the 2008 global financial crisis or the 2011 Fukushima nuclear disaster, the strategist said. "Investors should buy on the recent adjustment because it will create an opportunity," he said. "The past few days have seen signs of a recovery in foreign demand after the stock market slid over 20% from its historic high in July."

There are about 280 Japanese stocks with a trading volume of more than $20 million a day, in which about 50 stocks are widely known to foreign investors and held in large positions, the strategist said. "When people are operating capital in Japan, risk limits are quite strict. When these risk limits are affected, there is often more selling pressure."

According to financial reports, the proportion of foreign holdings of Toyota Motor Company, Mitsubishi UFJ Financial Group, and Sony Corporation, the three stocks with the highest weighting in the TOPIX index, is no less than 20% as of March.

Goldman Sachs lowered its year-end target for the TOPIX index from 2850 points to 2700 points due to the short-term negative impact of the stock market correction, but still maintained its 12-month target at 2900 points. Kirk said: "I don't think we're out of the woods yet. Perhaps focusing more on domestic demand-driven factors, relative to global and cyclical drivers, is a more defensive way to manage portfolios."

But Kirk said that the stability of the yen should reassure US investors in Japanese stocks, adding that the current level of the yen is unlikely to pose a risk to corporate profits or expectations. Optimism comes from earnings in the first quarter and upward revision guidance. He also said that Tokyo Stock Exchange's corporate governance report, which will be released later this month, could have an impact on the market.

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