Thursday brought monumental gains for Japanese stocks as the prestigious Nikkei 225 index (NKY:IND) breached the 35,000-point threshold for the first time since the economic bubble of over 30 years ago. The surge was attributed to a weaker yen, fueling a rise in exporter shares.

The influential blue-chip index (NKY:IND) closed 1.8% higher at 35,049.86, marking one of the most substantial weekly gains in almost four years. Concurrently, the broader Tokyo Stock Price Index, known as Topix, concluded up 1.6% at 2,482.87 points. Moreover, the yen (USD:JPY) weakened to approximately 145.56 against the U.S. dollar.

Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank, asserted, “Japanese stocks have been cheap for a long time, along with corporate governance reforms and the effect of Warren Buffett from last year,” alluding to the American billionaire boosting his stakes in Japanese trading firms.

Traders remain hopeful for a revival in the Japanese economy following years of deflation, while weaker wage data dampened expectations of the Bank of Japan raising interest rates imminently. In November, inflation-adjusted real wages plunged by 3.0% year-on-year, marking the 20th consecutive month of contraction. According to BOJ Governor Kazuo Ueda, a sustainable increase in wages is indispensable before monetary policy tightening can be considered.

Commenting on the latest wage data, IG analyst Tony Sycamore said, “The latest wage data gave Nikkei (NKY:IND) the excuse to pop up towards the 35,000 level,” adding that further gains are probable “while we try and work out when the BOJ can look to take its next step.”

Insights into Japan’s Financial Landscape