Japan’s Nikkei 225 index posted steep gains on Thursday, hitting record highs, as sentiment towards the Bank of Japan’s (BOJ) dovish tone stayed strong even after the central bank ended its more than decade-long negative interest rates.
The Nikkei 225 rose almost 2.00% in the morning session to a record high of 40,787 points, trading near the 41,000 psychological level.
The increase was a late result of dovish cues from the BOJ, as Japanese stock markets were closed on Wednesday in observation of the Vernal Equinox holiday. The index last stood 1.67% higher at 40,671 points on Thursday.
The surge was also broad-based but headed by major tech stocks, as the sector found support on a more robust demand outlook from the thriving artificial intelligence (AI) space.
Still, analysts said reaching 41,000 points may signal a peak for the Nikkei 225, and it may be rangebound in the coming months.
BOJ Remains Dovish on Uncertain Economic Outlook
At its Tuesday meeting, the BOJ took a historic step by raising interest rates between 0% and 0.1%, ending its ultra-low rates and yield curve control (YCC) program.
However, the central bank’s Governor, Kazuo Ueda, stated that they expect to continue with an accommodative monetary policy for now and plan to keep certain asset purchases in the near term.
Ueda highlighted an uncertain outlook for Japan’s economy, particularly in private consumption, which declined 0.3% in the fourth quarter from the third quarter’s reading of a 0.2% drop.
The BOJ governor said there are many risks around the world economy, such as the prospect of a ‘negative market shock.’ There is also the possibility that consumption would not meet recovery expectations, according to Ueda.
Sticky inflation in the country has weighed on local demand and private consumption. Record wage hikes are seen driving consumption later this year, although the central bank needs further indications of such improvement.
Should the BOJ’s price projection exceed, or their median estimate stay, Ueda stated that it would be a clear sign of upside risk to the price outlook, prompting them to adjust policy.
