- Japanese share prices have risen substantially over the past six months
- Valuations are still lower than rival markets
- But there are issues with the composition of the stock market investors must understand
The sixteenth of May 2023 was a big day for investors in Japan. It marked the moment the Topix index, a broad measure of Japanese large caps, surpassed its previous peak, all the way back in 1989.
Japanese equities have enjoyed a good run this year. The Nikkei 225 index, a rival index, is up 31 per cent in local currency terms between the start of this year and 20 June. However, performance has often been volatile, putting off investors. But reforms in the early part of the past decade, kicked off by late Prime Minister Shinzo Abe, have helped turn a legacy market into something resembling the 21st century. It's allowed a stock market, which once housed consumer stocks that were the envy of the west, to shake off the ridicule it had endured since the Asian financial crisis. But the story of deflation and less relevant business hangs over Japan like a dark cloud, though some say its new-found lease of life could set it free.