Japanese stocks have been breaking record highs day after day, extending a powerful rally that began in April, as investor confidence in the world’s fourth-largest economy continues to grow. The surge has been driven by strengthening trade ties with the US and renewed optimism around artificial intelligence, keeping the momentum strong.
The Nikkei 225, which tracks the performance of 225 highly-capitalised and liquid publicly listed Japanese companies, reached , as momentum remained strong for the sixth straight day.
In a display of sustained strength, the index crossed the 51,000 mark for the first time in the previous session, extending the October rally to 15% and pushing its year-to-date gains to 31%.
With its strong October performance, the index is on track to extend its monthly winning streak to seven, having closed six of those months in the green. Since its April lows, the Nikkei 225 has surged an impressive 68%, rising from 30,374 to the previous close of 51,015.
Fresh ties with US
As part of his diplomacy tour in Asia, which began on October 26, U.S. President Donald Trump has signed multiple deals focusing on rare earths and critical minerals, particularly aimed at countering China’s export controls.
Trump and Japan’s Prime Minister Sanae Takaichi, on Tuesday, and processing of rare earths and other essential minerals used in advanced technologies.
According to a statement from the White House, the U.S. and Japan plan to cooperate through economic policy and coordinated investments to accelerate the development of diversified, liquid, and fair markets for critical minerals and rare earths.
Trump’s visit marked his first meeting with Takaichi, who assumed office earlier this month. Earlier this week, he signed similar critical minerals deal agreements with Malaysia, Cambodia, and Thailand.
Meanwhile, Chinese President Xi Jinping said Thursday that as his meeting with U.S. President Donald Trump to address trade and tariff concerns got underway.
This is the first time the two leaders are meeting in person since Trump began his second term in January.
Walking into the meeting, Trump said that both sides had already agreed to many things and would “agree to some more now,” according to Reuters.
Tech powered the rally
AI data centre and chip-related shares have been instrumental in driving overall gains for Japanese stocks so far, positioning the Nikkei 225 as a top performer on the global stage.
Globally, AI optimism has emerged as one of the biggest drivers of stock market gains, fueling the ongoing rally in US equities. Tech giants such as Nvidia, Microsoft, and Alphabet have led the surge, making these companies more valuable than ever.
In Japan, chip-related firms such as Tokyo Electron, Advantest, and SoftBank have benefited from similar AI tailwinds. Advantest, which has the largest influence on the Nikkei 225 with a 9% weight, has surged 370% from its April lows to trade at JPY 22,120, marking the stock’s most sustained rally in recent years.
Technology start-up investor SoftBank Group has also surged 375% over the same period, while other chip and AI-related stocks such as Disco Corp, Lasertec, and Tokyo Electron have risen between 100% and 150% from their April lows.
Nikkei 225 vs Nifty 50
While the rally in Japanese stocks has been largely driven by AI optimism, the same momentum has been weak on Dalal Street. However, Indian IT stocks have started showing signs of recovery, with the Nifty IT index gaining 7.24% in October, its biggest monthly rise since November 2024.
In a broader context, the Nifty 50 still trails far behind the Nikkei 225. The Indian benchmark has gained about 10.20% so far in 2025, compared with a 31% rally in its Japanese counterpart.
However, signs of an earnings recovery, easing concerns over rich valuations, and a potential rebound in domestic consumption could, according to analysts, set the stage for a fresh leg of the rally in the coming months.
Analysts also noted that overhang for overseas investors. This, in turn, may reverse their prolonged bearish stance on local equities and further support the market’s upward momentum.
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