Why does the Japanese stock market still perform well against the backdrop of a yen interest rate hike?

Against the backdrop of a Bank of Japan interest rate hike, the Nikkei 225 index is still hitting new highs. Here are a few reasons why:

Historic Bull Run in AI and Semiconductor Stocks

Kioxia is one of the memory concept stocks, Tokyo Electron is a top-five global supplier of semiconductor materials and equipment, and SoftBank has invested heavily in AI, reaping significant rewards from Arm. These semiconductor + AI heavyweight stocks are the strongest drivers of the rally.

Yen Depreciation Boosts Profits for Export-Oriented Companies

Japan has a large number of export-oriented companies and many companies operating overseas, earning foreign currency. Profits denominated in yen will rise.

Warren Buffett Increases Holdings in the Five Major Trading Houses

During Japan's bubble era, those old-guard stocks were hit hard. Now they are slowly recovering, aided by Buffett's support.

Japan Escapes Long-Term Deflation; Companies Gain Pricing Power

In the past, it was difficult for Japanese companies to raise prices, and profit margins were suppressed. Now, with improvements in inflation, wages, and price transmission, investors are beginning to believe that the recovery in Japanese corporate profits is not a one-time event but a structural improvement. This logic supports a valuation re-rating.

Tokyo Stock Exchange Governance Reforms Raise Shareholder Return Expectations

The Tokyo Stock Exchange continues to urge listed companies to improve capital efficiency and pay attention to capital costs and stock prices.