The Nikkei 225 has risen rapidly, climbing from the ¥51,000 range at the end of March to above ¥63,000 on 7 May. As of 12 May, it was up 22.9% from the end of March. While semiconductor stocks have driven the market, this analysis explains the background and outlook without concluding that the market is in a bubble.
The rally in Japan’s equity market has continued, with the Nikkei 225 rising from the ¥51,000 range at the end of March to above ¥63,000 on 7 May. As of 12 May, it was up 22.9%, significantly outperforming U.S. stocks. The index closed at ¥63,272.11, up ¥529.54 from the previous day, while concerns about the market’s high level are also growing.
The backdrop is a global rally in semiconductor stocks. Semiconductor-related stocks have made a significant contribution to the Nikkei 225’s rise, and similar movements have been seen in South Korea and Taiwan, suggesting that a global trend is supporting the Japanese market.
The expansion of demand for data centers is cited as a factor behind the rise in semiconductor stocks, while a reassessment of AI investment is also seen as a positive factor. Higher oil prices and inflationary pressure could increase costs across all industries, but the growth prospects for AI and semiconductors are considered relatively favorable.
As for the differences from the IT bubble, current AI and semiconductor companies are said to be making progress in research and development and capital investment backed by actual business fundamentals. The outlook is therefore that excessive optimism can, for now, be avoided. Attention is focused on whether expectations for future growth can be sustained over the medium to long term.
The risk of persistently high U.S. inflation and the Federal Reserve’s interest-rate outlook also require attention. U.S. CPI was up 3.8% in April, a high level, and developments in oil prices could affect the stock market. Japan’s economy is considered to face a low risk of significant deterioration, while wage increases and fiscal policy are expected to result only in a gradual rise in interest rates.