Last week, the Nikkei stock index shattered records for the first time in 34 years and was closing in on the 40,000 mark at the time of this writing.
Even considering the boost from the better-than-expected economic and stock market performance in the U.S, the recent market rally in Japan has been remarkable, with the business community celebrating the historic moment as the possible end to the nation’s “lost three decades.”
And yet, the country's macroeconomic reality remains tenuous. It is also a stretch to say that the profitability of Japanese companies' main business activities has significantly improved, too. Although the economic growth rate was relatively good, recording 1.9% in 2023, domestic demand was rather weak. This year's economic growth rate is expected to slow down to below 1%, making the high stock prices a unique phenomenon.