Japan’s Nikkei 225 Passes Dot-Com Peak to Close at 18-Year High

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Japan’s Nikkei 225 Stock Average rallied to the highest close since 1996 as gains by shippers and brokerages pushed the equity measure through its dot-com era peak.

“Finally,” said Masaaki Yamaguchi, a Tokyo-based equity market strategist at Nomura Holdings Inc. With that milestone out of the way, “we’ll see an even higher tolerance for risk,” he said.

The Nikkei 225 rose 0.3 percent to 20,868.03 at the close in Tokyo, surpassing its April 2000 high. The measure is up 20 percent in 2015, climbing for a fourth year, amid optimism about the outlook for Japan company earnings and corporate governance improvements. The broader Topix index added 0.2 percent on Wednesday to the highest since 2007.

Shippers led gains on the Topix, with Mitsui OSK Lines Ltd. adding 1.8 percent. A gauge of brokerages also advanced, with Nomura Holdings Inc., the largest securities firm, rising 1.3 percent. Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. each climbed 0.6 percent. Konica Minolta Inc. fell the most on the Nikkei 225 after agreeing to buy U.S. company Radiant Vision Systems.

In December 1996, when the Nikkei 225 last closed at these levels, Japanese stocks were near the start of a slide that saw the measure sink 43 percent from a June 1996 peak through an October 1998 trough. The equity index remains far shy of its 38,915.87 record reached in 1989 amid an asset-price bubble.

Different Market

“The market is very different now,” Nomura’s Yamaguchi said. “We have our feet more firmly on the ground with regards to economic growth. Back then, we were still recovering from the bubble, so even though shares rose in 1996, no one would call it a high. It was more like a technical rebound after plunging.”

The Bank of Japan released minutes of its May meeting Wednesday, which showed many policy makers plan to continue monetary stimulus until Japan’s inflation rate stabilizes at 2 percent. While prices remain far short of that level, central bank easing is propelling gains in company profits, with those for Nikkei 225 firms climbing to a fresh record last fiscal year.

“The Japanese economy is improving and corporate earnings are doing well,” Hiroichi Nishi, a manager at SMBC Nikko Securities Inc. in Tokyo, said by phone. “As monetary policy in the U.S. moves toward normalization, we’ll have moderate rate hikes. We’ll continue to have to watch the situation in Greece carefully, but within the wait-and-see mood there’s increasing hope that they’ll come to an agreement.”

U.S., Greece

E-mini futures on the Standard & Poor’s 500 Index slipped 0.1 percent. The underlying gauge gained 0.1 percent in New York on Tuesday to close near a record as investors weighed economic data for clues on the timing of higher U.S. interest rates amid optimism that a deal on Greek aid is within reach. A reading on first-quarter U.S. gross domestic product is due Wednesday.

Federal Reserve Governor Jerome Powell said Tuesday the chances are about 50-50 that the U.S. economy will improve enough for the central bank to raise interest rates in September, as the job market strengthens and signs of wage growth emerge.

Greek Prime Minister Alexis Tsipras is seeking to shore up support at home for proposals aimed at ending the indebted nation’s five-month standoff with creditors. Euro-area finance ministers meet Wednesday to try to secure an agreement to prevent Greece from defaulting, ahead of a second, scheduled summit of European Union leaders on Thursday.

Greek Lull

“A relative lull in the Greek negotiations allowed the market to return its focus to relative monetary policy, where it seems the Fed will be one of the few central banks to be raising rates this year,” Kymberly Martin, a senior markets strategist in Wellington at Bank of New Zealand Ltd., wrote in an e-mail to clients. “The U.S. first-quarter GDP may gain some attention tonight. Otherwise, focus will remain on Greek headlines.”

The Topix Marine Transportation Index rose 1.2 percent. The Baltic Dry Index, a gauge of commodity shipping rates, climbed 1.4 percent on Tuesday to its highest close this year. Mitsui OSK increased 1.8 percent.

The Topix Securities Index added 1.1 percent. Nomura rose 1.3 percent while Daiwa Securities Group Inc. advanced 1.5 percent. Both companies’ investment ratings were raised by Barclays Plc.

Banks provided the biggest support to the Topix, with a gauge tracking lenders adding 0.6 percent and Mitsubishi UFJ and Sumitomo Mitsui rising by the same amount.

Konica Minolta tumbled 3.8 percent, its biggest drop since February. The company said it will acquire Radiant Vision Systems, without disclosing the terms. The camera maker will pay about 30 billion yen ($242 million) for the U.S. measurement-equipment manufacturer, the Nikkei newspaper reported.

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