Japan’s Nikkei index extends record-high rally, 40,000 in sight

Investing.com-- Japan’s Nikkei 225 index opened at record highs on Monday, extending a strong run from last week as investors piled into local stocks amid hype over artificial intelligence and the prospect of ultra-low interest rates.

The Nikkei 225 rose 0.6% to a record high of 39,420.0 points, hitting a record high for a second consecutive session after a strong rally last week. 

The index was also within sight of the coveted 40,000 point level which, if breached, could herald further upside. 

A bulk of the Nikkei’s gains were also made in catch-up trade, after Japanese markets were closed for a three-day weekend. 

Gains on the Nikkei were driven chiefly by strength in heavyweight technology and chipmaking stocks. Tech saw renewed strength last week following consensus-beating earnings and guidance from AI darling NVIDIA Corporation (NASDAQ:NVDA), which ramped up hopes that demand for chips and tech will improve amid increasing AI development.

But broader Japanese shares were also supported by the prospect of monetary conditions remaining ultra-dovish for longer, especially as the Bank of Japan signaled a staggered exit from ultra-low interest rates. 

This notion kept the yen close to its weakest level in 30 years, further attracting foreign investors into Japanese assets.

Data on Monday showed Japanese corporate services price index inflation- a leading gauge for consumer inflation in the country- grew less than expected in January, heralding a similar reading from consumer inflation data due later this week.

Softer inflation puts less pressure on the BOJ to begin tightening policy, heralding more facilitative conditions for Japanese stocks. 

The broader TOPIX index rose 0.4% to 2,671.69 points, and also traded at a record high.