The Nikkei 225 is storming historical highs: the weakening yen heats up the Japanese market
Japan's stock market is demonstrating impressive bullish momentum. On Monday, the Nikkei 225 index broke through the 72,000-point mark, updating its all-time high in its entire 76-year history. The driver of this rally was another weakening of the national currency — the yen exchange rate fell to 161.7 per dollar, closely approaching the critical level of 161.96.
Record growth amid currency pressure
At the close of the trading session, the Nikkei 225 stood at 72,353.96 points, gaining 1.55%. The intraday high even reached 72,831 points. The Topix index also showed confident growth of 1.24%, stopping at 4,095.05 points. The market capitalization of the Japanese stock market increased by more than 25.74 trillion yen (about 156 billion dollars). A wave of optimism also swept other Asian markets: South Korea's KOSPI rose by 0.7%, and China's SSE Composite Index by 1.78%.
The positive sentiment in Asian markets was also fueled by news of productive talks between the US and Iran in Switzerland, which reduced geopolitical risks in the region.
Yen under threat of 40-year low
While stock indices are updating records, the yen continues to depreciate. If the exchange rate breaks through the 161.96 level, the Japanese currency will find itself at its weakest point since 1986. This is happening despite active attempts by authorities to stop the decline. From late April to late May alone, Japan spent a record 11.73 trillion yen (73.6 billion dollars) on currency interventions.
Notably, data from the Ministry of Finance shows that over the same period, Japanese investors reduced purchases of foreign securities by 75.6 billion dollars. This amount is almost identical to the volume of the latest currency intervention, hinting at a possible connection between these events.
The Bank of Japan has already tightened monetary policy, raising the key interest rate from 0.75% to 1% — a level not seen since 1995. However, contrary to classical logic, the yen continues to weaken. This points to deep structural problems and persistent strong demand for the dollar, which outweighs the effect of the rate hike.
Cryptalist analyst comment: The paradoxical situation in the Japanese market is a classic example of divergence between the stock and currency markets. The rise of the Nikkei 225 is directly fueled by the weak yen, which benefits export-oriented giants. However, for crypto investors, this case serves as an important reminder: macroeconomic imbalances, like those in Japan, can at any moment trigger a sharp change in sentiment. If the Bank of Japan decides on more aggressive measures, we could see a sudden strengthening of the yen, which would cause a correction in both stock markets and, indirectly, in the digital asset market.