Japan's Nikkei crossed the 50000 point mark for the first time. Will it give a boost to stocks?

Japan's blue-chip index Nikkei 225 surpassed the 50,000-point level for the first time in history. Investors believe in economic recovery under the new Prime Minister, who this week will hold talks with Donald Trump, and hope for a détente in relations between the U.S. and China. According to strategist Kohei Onishi from Mitsubishi UFJ Morgan Stanley Securities, the overcoming of the psychological mark by the index itself can spur further market growth.

Nikkei 225 rose by 2.4% to 50491 points in the first half of the day on October 27 in Tokyo. According to Bloomberg, shares of chip manufacturers and defense companies were the leaders of growth. Securities of Advantest, one of the world's leading manufacturers of chip testing tools, rose 6.5%. Quotes of defense contractors Kawasaki Heavy Industries and IHI Corporation rose by 9% and 2.8%, respectively.

"The very fact that the Nikkei has overcome the milestone of 50000 points, may be a factor that stimulates the strengthening of the stock market," - quotes Bloomberg investment strategist Mitsubishi UFJ Morgan Stanley Securities Kohei Onishi. At the same time in the second half of the week investors may become more cautious and take a wait-and-see attitude, as from next Monday the market's attention will shift to the reports of Japanese companies, the analyst said.

The stock market was supported by the statements of the leadership of China and the United States, indicating the mitigation of mutual threats ahead of talks between the leaders of the two largest economies in the world. U.S. President Donald Trump and Chinese President Xi Jinping plan to meet on the margins of the APEC summit in Seoul on October 30. As reported by the BBC, a framework agreement has already been prepared for the meeting, including Beijing's postponement of export restrictions on rare earth metals and Washington's refusal to impose 100 percent duties on Chinese imports.

The rise in the Nikkei index above the 50000 mark was also fueled by the market's high hopes that newly elected Japanese Prime Minister Sanae Takaichi, a proponent of a soft fiscal policy, will begin to actively stimulate the country's economy, Nikkei Asia wrote, citing Nomura economist Takahide Kiuchi. But if Trump, at a meeting with Takaichi on October 28, demands to increase the country's defense spending or strengthen the yen by raising the interest rate, it could "deal a serious blow to Japanese stocks," Kiuchi warned.

The Nikkei 225 crossed the 45,000-point mark on September 16 and has since taken one level after another. This is a sharp reversal for the Japanese stock market, which has stagnated for decades: it took 34 years for the Nikkei to recover to the peak reached during the financial bubble era of the late 1980s, Reuters notes.

This article was AI-translated and verified by a human editor