'Foreign investors are back': Japan stocks surge to their highest since 1990

Japan's Topix Index deed its highest constituent since August 1990, a motion that overseas investors are back.

The Tokyo Price Index, besides known arsenic Topix, has gained much than 6% year-to-date. The broad-based index, made up of astir 2,000 constituents, has outperformed its determination peers successful the Asia-Pacific.

The Topix roseate 0.6% connected Tuesday and continued to commercialized higher connected Wednesday, led by utilities, user cyclicals, exertion and financials. Shares of Tokyo Electron, Oriental Land, Softbank Group, Sony and Nintendo were among the apical gainers connected Wednesday morning.

"Foreign investors are backmost – which says thing astir the quality of the equity marketplace betterment successful Japan," Societe Generale's Asia equity strategists Frank Benzimra and Tsutomu Saito said successful a Tuesday note.

"That is simply a little [of] a duration commercialized than a broad-based upturn based connected fundamentals, robust home demand, and much generous organisation argumentation (share buybacks accelerate)," helium wrote.

The steadfast noted that overseas investors bought a nett 2.1 trillion yen ($15.4 billion) worthy of Japanese stocks successful April – adding that Japan's firm assemblage remains the largest nett purchaser of Japanese stocks, with a measurement of 1.1 trillion yen year-to-date.

The Nikkei 225 besides roseate to the highest since November 2021, besides led by concern names including NSK, Mitsubishi Materials, and Nippon Sheet Glass. The scale topped the intelligence level of 30,000 connected Wednesday morning.

Earlier this year, shares successful Japan's apical 5 trading houses saw a boost successful prices aft president and CEO of Berkshire Hathaway Warren Buffett raised his stakes successful the firms and hinted that helium whitethorn summation his holdings adjacent further.

Monex Group's Jesper Koll told CNBC that Buffett's caller travel to Japan to conscionable with the trading companies was considered a "stamp of approval" for investing successful Japan.

Societe Generale strategists added that their overweight presumption connected Japanese equities remains unchanged.

They expect the cardinal slope to widen its output curve power set to 100 ground points supra and beneath its people for 10-year Japanese Government Bonds of 0%.

Such a determination would "be bullish for the yen, but not automatically bearish for stock prices arsenic the yen remains successful heavy undervalued territory," the strategists wrote, adding that the firm assemblage would person a competitory vantage to the YCC set being widened.

The Bank of Japan shocked enslaved markets successful December erstwhile it past widened the range from 25 ground points to 50 ground points.

The Japanese yen traded astatine somewhat weaker levels to 136.43 against the greenback connected Wednesday.

At Kazuo Ueda's archetypal gathering arsenic cardinal slope governor, the Bank of Japan made nary changes to its monetary argumentation portion announcing a argumentation reappraisal ahead.

SocGen strategists said the BOJ's alteration successful monetary argumentation volition apt beryllium a "very gradual process with nary elimination of the YCC [Yield Curve Control] argumentation and involvement complaint hikes expected successful the adjacent 2 years."

"Keep an overweight presumption connected Japan equities, unhedged, and biased to banks, financials, and value," they wrote.

Goldman Sachs' said successful a May 12 study that the concern slope sees a "number of reasons" to enactment its bullish stance connected Japanese stocks.

"Specifically, we enactment the coagulated fundamentals compared with stocks connected overseas markets, and we besides deliberation that expectations for structural changes/reforms could propulsion Japanese equities up adjacent further," wrote Japan equity strategist Kazunori Tatebe.

Noting determination is simply a accidental of structural reforms ahead, helium added: "We judge that the main risks to our bullish presumption connected Japanese equities are from overseas factors specified arsenic the U.S. indebtedness ceiling problem, recession risk, and geopolitical risk."

– CNBC's Lim Hui Jie contributed to this report.