The TOPIX index hit a 34-year high, and the Nikkei 225 index rose for four consecutive days, setting a new record since March this year for the longest continuous rise, reaching a new high after March 27th.

The Nikkei ETF rose today, the Huaxia Fund Nikkei ETF rose more than 3%, and the E Fund Nikko Nikkei 225 ETF, Huaan Fund Nikkei 225 ETF, ICBC Credit Suisse Fund Nikkei ETF, and Southern Fund Japan TOPIX Index ETF rose.

As of July 2, more than 3.5 billion yuan of funds flowed into the Nikkei 225 ETF, the Japan TOPIX Index ETF and the Nikkei ETF this year. Among them, Huaan Fund Nikkei 225 ETF had a net inflow of 1.798 billion yuan, and the Southern Fund Japan TOPIX Index ETF had a net inflow of 1.051 billion yuan.

In the first half of this year, the Nikkei 225 index had a higher return on investment than the Nasdaq index in the USA, ranking second among major global investment products. Foreign investment flowed into undervalued and high-dividend “Nikkei special estimation” stocks, pushing major Japanese stock indexes to historic highs in 2024. Recently, data released by the Japan Exchange Group showed that the proportion of foreign ownership has reached a new record.

As of the fiscal year ending in March of this year, the proportion of foreign investors holding Japanese stocks has reached a record high of 31.8%. This is the highest level since comparable data first became available in 1970, when the proportion of foreign holdings in Japanese stocks was only 4.9%.

As early as August 2020, Buffett announced that he held 5% of the shares of the top five Japanese commercial companies. After that, Buffett continued to buy Japanese stocks. With the blessing of the stock god halo, foreign investment continued to pour in, and the Japanese stock market continued to rise.

The core driving force of this round of global stock market growth lies in large-cap stocks, and A-shares, US stocks, Japanese stocks, and European stocks all show the same pattern. The Japanese stock market has performed well since 2023, mainly due to foreign investment in high-dividend large-cap stocks, which has driven the stock index to continue to rise.

Berkshire Hathaway, under Buffett, has made a profit of more than 2 trillion yen (about 12.9 billion US dollars) from these five trading companies. Data shows that the amount of stocks purchased by foreign investors last fiscal year increased to 320 trillion yen (about 2 trillion US dollars), a year-on-year increase of more than 40%. Although the Japanese stock market has performed strongly, the weak yen exchange rate has also made global traders cautious.

On July 2nd, the yen plummeted, and the yen-dollar exchange rate reached its lowest point in 38 years. On the one hand, the strong growth of the Japanese stock market in recent years has benefited greatly from the depreciation of the yen. Most of the revenue of many Japanese companies comes from overseas, and the depreciation amplifies the profits of listed companies. On the other hand, Japan relies on imports in the fields of energy and food, and the depreciation of the yen is greatly pushing up prices in the country.

As the yen continues to depreciate, foreign investors are worried that the value of Japanese stocks denominated in US dollars will be affected. They have been net selling Japanese stocks for the past few weeks, which is the longest period since March 2023. Due to the accumulation of negative factors caused by depreciation, it has triggered the recent downgrade of the Schroder Investment Company's rating on the Japanese stock market. As far as the constantly depreciating yen is concerned, Standard Chartered expects that the yen may stabilize as the US Federal Reserve is expected to lower interest rates in the fourth quarter while the Bank of Japan is expected to continue to raise interest rates.