Japan's Nikkei, After 34 Years, Briefly Tops Record Close in Intraday Trading

Mark set at peak of 1980s bubble is surpassed at one point Thursday as foreign investors pile into market

A board displaying share prices on the Tokyo Stock Exchange in Tokyo on Thursday.

TOKYO—Japan’s benchmark stock average briefly traded Thursday above its all-time high close set more than 34 years ago, a milestone in the country’s recovery from a popped bubble that left the economy in the doldrums for decades. 

In intraday trading Thursday morning, the Nikkei Stock Average of 225 shares reached 38924.88, higher than the record close of 38915.87 on Dec. 29, 1989.

However, as of late Thursday morning, the Nikkei hadn’t topped its all-time intraday high of 38957.44, set on the same day in 1989. That was the last trading day of a decade that saw one of history’s great stock and real-estate bubbles.

The milestone was powered by foreign investors who are encouraged by Japan’s corporate-governance changes and are piling into the country as China’s lure fades.

The Nikkei has staged a strong rally since November on optimism that Japan has broken out of its longstanding problem of flat or falling prices, as well as anticipation that the country’s tech industry will benefit from global demand in the artificial-intelligence era. Pessimism about China has driven investors to redirect money to Japan, analysts said. 

Japan’s wages and profits are improving, and companies are using their assets more efficiently, said Jonathan Garner, a longtime Asia strategist at Morgan Stanley. “That’s working in a virtuous cycle upwards as you exit deflation,” he said. “Whereas for China, the exact opposite is happening.”

Garner said the reversal of fortunes between Japan and China “is causing some very large reallocations within portfolios right now.”

News that U.S. chip maker Nvidia’s salesmore than tripledin the latest quarter helped the Nikkei make gains Thursday.