Japan's Nikkei 225 index began this week with a 6th straight all-time peak - the first time it's done that since 1989, according to Bespoke
Japanese stocks have been flying high this year.
Japanese stocks remain hot, with the Nikkei 225 continuing to trounce the U.S. equities market this year as it posted a fresh record peak on Thursday.
Japan's Nikkei 225 index JP:NIK rallied 4.6% Thursday, recovering from a brief pullback. Prior to that, the index on Monday notched a sixth-straight record closing high - its first such streak in nearly 40 years, according to Bespoke Investment Group.
"Japan is finally seeing that its companies are getting pricing power because of the exit from deflation," Jimmy Chang, chief investment officer at Rockefeller Global Family Office, said in an interview. "We still like the Japanese equity market relative to other international markets."
The Nikkei finished trading on Thursday with a huge gain this year of 43.8% in local-currency terms, according to Dow Jones Market Data. That's far higher than the S&P 500's SPX year-to-date climb of 7.5% through Thursday, while Japanese equities are helping a broad gauge of international stocks excluding the U.S. outperform as well.
Beyond the reflation trend in Japan, the Japanese stock market has benefited from a "pro-business" government as well as from U.S. companies spending massively on artificial intelligence, according to Chang. Whereas elsewhere in Asia, the South Korean equities market KR:180721 is dominated by two companies that have benefited from the AI trade - SK Hynix (KR:000660) and Samsung Electronics (KR:005930) - the Japanese market is less concentrated in technology stocks, he noted.
The Nikkei 225 had gone "decades without hitting a record high after the bubble burst in 1989" for Japan's stock market, Bespoke said in a note emailed on Monday.
The recent rally in Japanese stocks has been fueled in part by "corporate reform" and the "very pro-business" stance of Japan's new prime minister, Sanae Takaichi, Paul Hickey, co-founder of Bespoke, said by phone. Investor enthusiasm for AI and tech-related stocks has also helped propel the Nikkei to new heights this year, he said.
Hickey cited memory-products company Kioxia (JP:285A) as an example of a Japanese company benefiting from the AI boom. Tokyo-traded shares of Kioxia have skyrocketed around 895% this year through Thursday, according to FactSet data.
Tokyo Electron (JP:8035) has also seen huge gains, with FactSet data on Thursday showing that the company's shares have jumped 119.5% this year.
U.S. versus the rest of the world
International stocks are broadly beating the U.S. equities market in the first half of 2026, despite the S&P 500 booking a record high in early June.
While international stocks hit a rough patch versus the U.S. earlier this year during the Iran war - as investors worried about disruptions to oil shipments via the Strait of Hormuz - the Japanese market's recent rally has helped equities in the rest of the world broadly outperform the U.S. in the year to date.
Investors have been closely monitoring peace negotiations between the U.S. and Iran, with oil prices (CL00) (BRN00) falling over the past month, according to FactSet data, at last check. The U.S. Treasury Department announced on Monday that it had issued a license authorizing "the production, delivery and sale of crude oil, petrochemical products and petroleum products of Iranian origin through August 21, 2026."
Meanwhile, the iShares MSCI ACWI ex-U.S. ETF ACWX - a U.S.-listed exchange-trade fund that tracks an index of large-cap and midcap stocks from developed and emerging markets outside the U.S. - has surged 12.6% this year through Thursday, according to FactSet data.
Japan has played a major role in this. The iShares MSCI ACWI ex-U.S. ETF's largest geographical exposure as recently as June 24 was Japan, at 13.8%, according to the fund's holdings data on BlackRock's website. Taiwan had the next-biggest exposure based on the percentage of the fund's market value, at about 9.2%, followed by the U.K. at 8.2%, Canada at slightly more than 8% and South Korea at 8%, according to data on BlackRock's website.
While Chang said Japan is "extremely dependent on foreign energy," oil prices have recently declined, even if they remain elevated compared with the levels seen before the Iran war.
On the currency front, Reuters reported this week that U.S. Treasury Secretary Scott Bessent discussed his concerns over sharp swings in the Japanese yen (USDJPY) with Japan's finance minister, Satsuki Katayama. That raised expectations for a possible attempt to stabilize the yen, Chang noted - but he added that a potential currency intervention is not a factor in why he likes Japan's market, instead pointing to the business-friendly government and to Japanese companies regaining pricing power.
The reflationary shift in the Japanese economy post-COVID has helped to create an "easier backdrop for earnings growth," according to Hickey. "If you have stable inflation at relatively contained levels, that's a decent environment for stocks," because companies can increase earnings on the back of higher prices for goods and services, he said.
The U.S. stock market closed mixed Thursday, with the S&P 500 slipping less than 0.1% to finish almost flat, the Dow Jones Industrial Average DJIA rising 0.1% and the technology-heavy Nasdaq composite COMP falling 0.5%, according to FactSet data.
Angelo Kourkafas, senior global investment strategist at Edward Jones, told MarketWatch that he likes the U.S. stock market due to momentum in the American economy and corporate profits. But he also sees diversification benefits in emerging and developed markets.
Beyond technology, Kourkafas said that he sees investing opportunities in cyclical areas like industrials and financials, including in midcap stocks in the U.S. as well as in developed markets like Europe and Japan.
-Christine Idzelis
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(END) Dow Jones Newswires
June 25, 2026 16:48 ET (20:48 GMT)
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