The Nikkei Stock Average surpassed the 60,000 level for the first time during intraday trading. However, this milestone was reached as a result of capital concentration in a limited number of stocks. As escalating tensions in Iran heighten economic and price uncertainties, TOPIX continues to tread water. Amid the dominance of momentum investing that follows trending stocks with strong price movements, major U.S. tech companies are set to announce their earnings results, which will serve as a litmus test for the future direction of the market.

- "Ten-bagger" realization passes the eighth stage

The Nikkei average rose to as high as 60,013.98 yen on the 23rd. It broke through the 50,000 mark on October 27 last year. This represents an increase of approximately 10,000 yen in less than half a year. On an intraday basis, the low recorded in October 2008 during the Lehman Shock was 6,994.90 yen. Multiplying this by 10 gives 69,949 yen. Today's new high surpasses the eighth stage toward the ten-bagger level and is heading toward the ninth stage.

The major turning point for Japanese stocks was November 14, 2012. The Abenomics rally began on the day when then-Prime Minister Yoshihiko Noda announced the dissolution of the House of Representatives and a general election during a party leaders' debate. The low on that day was 8,653.49 yen. The high during the Abe administration was 24,448.07 yen on October 2, 2018, representing an increase of approximately 2.8 times during this period.

While there is debate about where to set the starting point of the current rally, OpenAI released "ChatGPT" on November 30, 2022, and the Nikkei average closing price that day was 27,968.99 yen. If this is taken as the starting point of the AI rally that has continued since then, the Nikkei average's rate of increase would be 2.1 times. Simply multiplying by the rate of increase during the Abenomics rally suggests upside potential for the Nikkei average to the 78,000 yen range. Some foreign securities firms have already forecasted the Nikkei average to reach 70,000 yen by the end of this year. Attention is likely to focus on whether a "ten-bagger" for the Nikkei average on an intraday basis can be achieved within the year.

On the other hand, TOPIX fell for the third consecutive day and is trading below the all-time high it reached before the military conflict in Iran. The NT ratio, which divides the Nikkei average by TOPIX, stands at 15.91 times, a record high level. Since April, high-priced semiconductor stocks such as Kioxia Holdings <285A>, SoftBank Group Corp. <9984>, and Advantest <6857> have been bought, pushing up the Nikkei average.

Although concerns about inflation and consumption slump risks stemming from the de facto blockade of the Strait of Hormuz have not disappeared, the Philadelphia Semiconductor Index (SOX) has risen for 16 consecutive sessions through the 22nd, delivering an extraordinary rally. Regarding AI and semiconductor-related companies, "visibility on the earnings front is high, and guidance risk is low," according to Ikuo Mitsui, fund manager of the investment advisory department at Aizawa Securities.

- Collective psychology of "buy on dips"

Momentum investing has intensified in both Japanese and U.S. stock markets, becoming a factor promoting concentration in high-tech stocks. The "MSCI World Momentum Index," designed with emphasis on stocks with high price momentum, has risen 14.4% as of the 22nd compared to the end of March. This outperforms the increase <9.5%> of the MSCI All Country World Index during the same period.

President Trump's repeated verbal interventions in the market, with situations where he held decisive power in forming market trends continuing for a long period, is believed to be one factor that has encouraged the tilt toward momentum investing. In addition, the strong recognition of "buy on dips" as an effective investment strategy is also significant. Over the past 10 years, the Nasdaq Composite Index formed genuine corrections only during the early stages of the COVID-19 pandemic and around 2022 when the Federal Reserve continued raising interest rates to address inflation. Since 2023, there have been financial anxieties following the Credit Suisse "AT1 bond" issue, a shock from the unwinding of yen carry trades after the Bank of Japan's rate hike, and the mutual tariff shock arrived in April 2025, but all were resolved in short periods.

The expanding presence of passive ETFs (exchange-traded funds) that track indices is also believed to play a major role in supporting the downside of stock markets. According to UK research firm ETFGI, global ETF assets under management stood at approximately 20.78 trillion dollars at the end of March 2026. This represents an increase of approximately 3.2 times compared to the end of 2019 before the COVID-19 pandemic. In a market environment supported by excess liquidity, it becomes apparent that not only individual investors trading on smartphones but also many institutional investors have continued to purchase index-tracking ETFs, including U.S. stocks, during correction phases.

The excess liquidity rally can be said to be a product of accommodative monetary policy. The Federal Reserve ended QT (quantitative tightening) in December last year, bringing to a close the balance sheet reduction phase that had been ongoing since 2022. The balance sheet has been gradually expanding since the beginning of this year. While Kevin Warsh, a former Fed governor and candidate for the next Fed chair, advocates reducing the Fed's expanded balance sheet as his position, the market does not appear to be taking this at face value. Even if Warsh becomes the next Fed chair, reducing the balance sheet could shock the market and would not be easy - such a view is not entirely unrelated to raising expectations for the continuation of the excess liquidity rally.

- Focus on TOPIX reclaiming highs

If the pattern of market corrections resolving in the short term continues to repeat, "buying late" after corrections subside would directly lead to lower investment returns. In the United States, Intel will announce earnings on April 23, and disclosures by tech companies such as Qualcomm , Meta Platforms , Alphabet , and Amazon.com will follow by the end of the month. The rally in tech stocks, which can be seen as anticipating strong earnings, brings about "fear of missing out" and makes the momentum market characteristics even more pronounced.

Domestically in Japan, YASKAWA Electric Corporation <6506> presented an increased profit plan for this fiscal year, providing no small amount of surprise and reassurance to market participants. Earnings announcements for companies with March fiscal year-ends are about to begin in earnest, and among semiconductor-related companies this month, Advantest is scheduled to disclose earnings on the 27th and Tokyo Electron Limited <8035> on the 30th. While many companies, primarily domestic demand-oriented businesses, are expected to present conservative forecasts for this fiscal year, expectations are spreading that listed companies as a whole will show increased profit plans. "The market has likely priced in the possibility that overall earnings forecasts will be cautious. If the Middle East situation and crude oil prices settle down, expectations for upward revisions are also likely to rise," says Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

Whether capital concentrated in a limited number of stocks will shift to other stocks, based on the increased profit plans of listed companies as a whole. Market participants' attention is focused on TOPIX reclaiming its highs. (Yoshiyuki Osada)

Source: MINKABU PRESS

*Translated by generative AI. Click here for the original article.