Japan’s Topix stock index rose above last summer’s record to close at a fresh peak as hopes of more US tariff deals brightened the outlook for global trade and economic growth.
The equity rally in Japan comes as gauges worldwide have notched all-time highs on expectations that President Donald Trump’s levies won’t hurt businesses as much as feared. A lower-than-expected 15% levy on Japanese exports to the US has fueled optimism that Trump might offer concessions to other trading partners, including the European Union.
The Topix, a broad-based measure that tracks over 2,000 companies, rose 1.7% to close at 2,977.55 in Tokyo, above its previous all-time high level of 2,929.17, set on July 11, 2024. The blue-chip Nikkei 225 Stock Average also rose 1.6% to 41,826.34, within a whisker of its record.
Japan’s benchmarks have rebounded from lows struck in early April following the announcement of Trump’s “Liberation Day” tariffs, largely on anticipation of a US-Japan trade deal. Trump announced the long-awaited truce Wednesday, sending the Topix and Nikkei climbing more than 3%. They extended gains Thursday.
“The risk-on sentiment has a solid reason behind it,” said Anna Wu, a cross-asset investment specialist at VanEck in Sydney. “Japan’s getting a lower-than-feared tariff rate from the US, which will be a net positive for economic growth, and that’s adding fuel to equities,” she said.
The trade deal has also given the Bank of Japan “breathing room” to reassess the pace of future interest rate hikes, Wu said. Banking shares were among the Topix’s biggest gainers Wednesday, boosted by expectations of a near-term hike. Exporters like electronics makers were also strong.
Japan’s stock market has been in a broad upswing over the last three years, supported by the nation’s emergence from deflation, and corporate governance reforms.
Inflows from foreign investors have helped the rally in recent months, with global funds turning net purchasers of cash Japanese equities for the past 15 consecutive weeks. Demand was boosted by a ‘Sell America’ strategy in the wake of Trump’s April tariff announcement, with Japanese firms’ moves toward better governance and juicier shareholder returns also helping.
“Japan remains a compelling value play,” said Christy Tan, an investment strategist at Franklin Templeton Institute, in a note. “Diversification motives and relative value” drove US and European interest in Japanese shares in the first half of 2025, she added.
The Topix milestone marks a recovery from a widespread rout last August, when the BOJ’s unexpected rate hike triggered a sharp appreciation in the yen and sparked selling in stocks. Just a month earlier, a historically weak yen and the global tech rally had lifted both benchmarks to levels not seen since 1989.
This rally could be short-lived, though, amid lingering concerns over Japan’s domestic politics, cautioned VanEck’s Wu. Prime Minister Shigeru Ishiba has denied local media reports he’s stepping down after his party’s loss of an upper house majority, while uncertainty around the nation’s fiscal policy remains.
“Japan’s mounting fiscal stress is not to be overlooked,” said Wu. Government bond yields have risen to historic highs this week on worries that Japan’s newly-weakened ruling coalition might have to concede to opposition parties’ calls for tax cuts.
“If we get multiple rounds of weaker-than-expected bond sales, then it introduces fresh complexity into the equity market,” said Wu. “For global investors looking at Japan, it’s stability and predictability that matter.”
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