Japan’s Nikkei Hits 34-year High on Wall Street Record, Dovish BOJ (Update 1)

Reuters

12:00 JST, January 23, 2024 (updated at 16:30 JST)

TOKYO (Reuters) – Japan’s Nikkei share average rose to a 34-year peak on Tuesday, buoyed by Wall Street’s climb overnight to a fresh record high and the Bank of Japan’s (BOJ) decision to keep ultra-easy policy settings intact.

The Nikkei rallied as much as 1.2% to 36,984.51, a level not seen since February 1990, before a wave of selling as traders locked in gains following a world-beating surge so far this year.

Japan’s benchmark index closed 0.08% lower at 36,517.57, putting its gains for 2024 at 9.12%. It stands head and shoulders above major global peers, many of which are negative for the year.

“People are just taking profits,” and the uptrend remains intact, said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

The BOJ’s easy monetary policy will support the stock market, taking the Nikkei to 38,000 in coming months, Omori added.

Japan’s central bank left its short-term interest rate target at -0.1% and that for the 10-year bond yield around 0%, as widely expected. BOJ Governor Kazuo Ueda will hold a news conference from around 0630.

Technical indicators have been flashing red, and analysts have been warning daily that a Nikkei pullback is likely. The relative strength index (RSI) still stands at 75.7, well above the 70 line that signals overbought conditions.

Several heavyweight Nikkei stocks that had posted gains early in the session slumped by the close.

Chip-sector giant Tokyo Electron rose more than 1% at one point but closed down 1.74% at a session low. Advantest rose 1.84% to scale a new record high but finished down 1.5%.

AI-focused startup investor SoftBank Group climbed 1.22% to touch a four-month top before ending with a 0.31% loss. Sony Group added 0.78% to reach a two-year high before sliding 0.71%.