Nikkei tops 70,000 for first time as BOJ rate hike boosts confidence in Japan's economy

Japan’s Nikkei Stock Average surpassed 70,000 for the first time on Tuesday, reaching an all-time high after the Bank of Japan (BOJ) raised its benchmark policy rate to 1%, the highest since 1995. The move, widely anticipated, triggered a 0.8% intraday surge in the Nikkei, though it settled slightly lower, while the broader Topix index rose 0.2%, reflecting improved investor sentiment. The BOJ’s decision marked a shift from decades of ultra-loose monetary policy, but its cautious tone reassured markets that further tightening would remain gradual. Analysts noted the central bank’s commitment to normalizing policy without accelerating rate hikes amid global growth and energy price uncertainties. The announcement came during Tokyo’s midday trading break, with gains resuming as investors focused on the BOJ’s measured approach. The Japanese yen strengthened modestly to 160.2 per dollar but remained near levels that have historically prompted intervention concerns. A weaker yen has fueled inflation by raising import costs, particularly for energy. Meanwhile, Japanese government bond yields rose to 2.625% for the 10-year bond, reflecting expectations of tighter monetary conditions. Technology and AI-related stocks drove the Nikkei’s record rally, with chip-testing firm Advantest surging over 5% and data-center infrastructure plays like Fujikura (+9.7%) and Furukawa Electric (+7.3%) attracting heavy buying. Despite gains in a few large-cap stocks, most of the Nikkei’s 225 constituents declined, underscoring the index’s sensitivity to a small group of heavyweight shares. The milestone follows growing optimism about Japan’s economic recovery and corporate earnings, though challenges like global growth risks and yen volatility persist. The BOJ’s cautious stance aims to balance inflation control with supporting economic stability.