The Japanese stock market has been experiencing a surge due to several factors, including a weak yen and positive changes in the corporate sector that have given shareholders more rights. After years of falling prices and sluggish economic growth, rising inflation in Japan has been welcomed as a sign that the country is headed in the right direction, especially as China has seen a downturn in its economy. Foreign investors have also played a significant role in the market’s rise, investing a net $14 billion into the Japanese market in January alone. Japan’s strong corporate profits and impressive quarterly results, particularly from large companies like Toyota and SoftBank, have further attracted foreign investors.
While Japan’s economy remains on shaky ground and the nation’s economy unexpectedly shrank in the fourth quarter, the country is attempting to stoke inflation by keeping interest rates low, despite raising rates being a common approach in other parts of the world to combat inflation. The recent earthquake that hit the Noto Peninsula in January has further complicated matters, leading the central bank to carefully assess when it would be appropriate to start raising interest rates while also accounting for potential global economic slowdown. Economists expect the central bank to raise interest rates out of negative territory but to hold them at zero for the rest of the year.
