Japan’s stock market defied gloomy economic data to rally Friday, lifting broader Asian shares and ending the week on a buoyant note.
Japan’s benchmark Nikkei 225 index closed above 38,000 points for the second day in a row, just a whisker off its historic peak reached in December 1989.
The stock market gains, which followed a rebound on Wall Street, came despite official data showing Thursday that the country slipped into recession in 2023, losing its crown as the world’s third-largest economy.
“The nine-month rally in Japanese stocks has had nothing to do with economics and, for that reason, yesterday’s weak (fourth-quarter) GDP read and a shrinking economy in US dollar terms due to a weak yen (are) not deterring investors,” said Neil Newman, a Tokyo-based strategist at Japanmacro.
“If anything, the window of opportunity created by the weak yen is encouraging international investors, as they suspect it will close soon,” he added.
The yen has fallen more than 6% against the US dollar so far this year, after losing about 8% against the greenback in 2023. A weaker yen makes shares in Japanese companies cheaper for foreign investors.
The United Kingdom also fell into recession in the final months of 2023 and US retail sales tumbled much more than expected in January. Analysts said the data could tip the scales in favor of central bankers lowering interest rates.
“Weaker economic indicators could pave the way for relatively looser monetary policy, providing a bullish backdrop for Asian markets, particularly from an interest rate perspective, if not an eventual economic one,” said Stephen Innes, managing partner at SPI Asset Management.
Other Asia-Pacific markets also rose following gains in New York. The MSCI’s broadest index of Asian shares excluding Japan closed more than 1% higher.
On Wall Street, the S&P 500 closed at a record high of 5,029.73 Thursday as US stocks bounced back from steep losses earlier this week. The blue-chip Dow Jones Industrial Average was up 0.9%, while the tech-heavy Nasdaq Composite finished 0.3% higher.
The US losses earlier in the week came after a key inflation report revealed stubborn price increases, raising concerns among investors that the Federal Reserve will keep rates high for longer than anticipated.
But markets bounced back after a Fed official eased those fears. Chicago Fed President Austan Goolsbee said Wednesday that slightly higher inflation over the coming months would still be consistent with inflation falling back to the Fed’s 2% target.
Innes commented Friday: “The resilience of the US economy, characterized by its ability to navigate global headwinds and sustain the growth momentum, underscores its position as a key driver of global economic activity.”
Hong Kong’s Hang Seng Index was up 2.5% Friday, while Korea’s Kospi rose 1.3%. Markets in mainland China remained closed for the Lunar New Year holiday. They will resume trading on February 19.
