Japanese Stocks Surge as Foreign Capital Pours In Amid Yen Weakness and U.S. Economic Strength

Japan's stock market experienced a notable week, registering the most significant inflow of foreign capital in six months. This uptick aligns with a broader trend influenced by favorable economic indicators from the United States.

The Nikkei 225 rose by 1.8% to close at 39,332.74 points, while the Topix index saw a 1.7% increase, reaching 2,739.39 points. A key driver of these gains was the performance of export-oriented sectors, particularly automobile manufacturers, buoyed by the weakening yen, which hit its lowest level against the dollar since mid-August at 149.13 last Friday.

Banks were among the standout performers, with the Topix bank index climbing 3.9%. This surge followed a rise in 10-year Japanese government bond yields, which mirrored movements in the U.S. Treasury market. Major financial institutions such as Mitsubishi UFJ Financial Group and Mizuho Financial Group posted gains of 3.5% and 4.9%, respectively.

The backdrop of these market movements includes a robust jobs report from the U.S., highlighting the resilience of its economy. September saw an addition of 254,000 non-farm jobs, the highest in six months, contributing to a drop in unemployment rates. As a result, U.S. bond markets faced declines, prompting traders to revisit their expectations regarding future Federal Reserve interest rate decisions.