The Nikkei 225 broke through 30,000 for the first time since August 1990, although it remains about 30% below the peak it reached on the last trading day of 1989. Within three years, the index had lost more than half its value and the economy’s slow recovery did not really begin until 2012 when the then Prime Minister Shinzo Abe introduce his ‘three arrows’ economic policy.
His easing of monetary policy – to the point that interest rates turned negative four years later – is now considered to have helped pave the way for today’s resurgence. Faced with another economic meltdown when the COVID-19 pandemic arrived last year, the Bank of Japan took the baton from Abe by buying more government bonds, doubling its purchases of exchange-traded funds and snapping up other assets. The additional liquidity this provided has been largely behind the rise in share prices, along with a growing conviction that Tokyo’s Covid-19 vaccination strategy would help throw off the shackles of the pandemic.