What drove the Nikkei past 60,000 was not a broad-based recovery of Japan’s economy, but a concentrated surge in semiconductor and AI-related stocks. The index opened higher, supported by strong U.S. market performance overnight, news of an extended U.S.–Iran ceasefire, and gains in Nikkei futures trading in Chicago.

The biggest contributors to the index were primarily semiconductor equipment, testing, and AI-related heavyweights. Tokyo Electron, SoftBank Group, and Advantest ranked among the top gainers. Sectors such as insurance, banking, electronics, information and communications, and services led the gains, while traditional sectors — including oil and coal, mining, utilities, non-ferrous metals, and steel — lagged behind.

A Narrow Rally Driven by Tech

This divergence — where technology stocks drive the index while traditional sectors weaken — has been in place for some time. Daiwa Asset Management’s Chief Strategist Kensuke Togashi previously noted that while AI, data center, and semiconductor stocks are pushing the market higher, the number of advancing stocks overall remains limited.

On April 22, the Nikkei closed at 59,585.86, approaching the 60,000 level. On April 23, that milestone was finally surpassed shortly after the market opened.

Looking at the composition of gains, a handful of heavyweight stocks — including SoftBank, Tokyo Electron, and Advantest — were responsible for most of the upward momentum. This suggests that the benefits of the rally are concentrated in a small group of “star” stocks linked to AI demand, rather than being broadly shared across the market.

Macro Factors Behind the Rally

On the macro front, U.S. President Donald Trump announced on social media that the ceasefire with Iran would be extended, raising the possibility of a broader peace agreement this week. This development improved risk sentiment, encouraging capital flows into equities.

At the same time, the continued weakness of the yen has provided strong earnings support for Japan’s export-oriented companies. USD/JPY has been fluctuating in the 158–160 range, close to levels that previously triggered government intervention in 2024.

A weaker yen benefits companies such as Toyota and Sony by boosting overseas revenue when converted into yen. It also enhances the valuation appeal of technology stocks, including those in the semiconductor sector.

However, yen weakness is a double-edged sword. The Bank of Japan is scheduled to hold its policy meeting from April 27 to 28, but expectations for a rate hike have dropped sharply. Data from Totan Research/ICAP shows that the probability of a rate hike next week has fallen to just 9%, while the likelihood of a move by June has risen to 62%.

Although household inflation expectations have reached their highest level since 2006 — with prices expected to rise 10.3% over the next five years — policymakers remain cautious due to concerns that Middle East tensions could negatively impact economic growth.

The expectation of “no rate hikes” has supported high equity valuations in the short term, but it also sets the stage for potential corrections. If the Bank of Japan is eventually forced to tighten policy, the sustainability of this rally — driven largely by a weak yen — could be called into question.

Is History Repeating Itself?

In contrast to the booming stock market, Japan’s macroeconomic fundamentals remain under pressure. High energy prices driven by Middle East tensions are worsening the country’s trade balance, given its heavy reliance on imported oil.

Corporate sentiment is deteriorating, while consumers are facing rising living costs due to yen depreciation. As higher energy costs erode manufacturing profits and weaker currency pushes up import prices, a widening gap is emerging between stock market performance and everyday economic realities.

History offers a cautionary lesson. From its peak of 38,957 in 1989, the Nikkei fell to around 7,000 by 2009. This demonstrates that rallies detached from economic fundamentals often end in sharp corrections.

The question now is whether today’s 60,000 level represents a genuine recovery after decades of stagnation — or another liquidity-driven, structurally narrow bull market fueled by a weak yen and a handful of technology stocks.

For now, the market should remain vigilant.