Despite Japanese stocks breaking through the "bubble era" historical highs, investors remain bullish on Japanese equities.

On February 22, Nvidia ignited market sentiment, driving a surge in global chip stocks and AI concept stocks. Japan surpassed its 1989 peak driven by chip stocks.

In response, Daiwa Securities' President Seiji Nakata pointed out that the current market condition is entirely different from the bubble era. He emphasized that this stock market high is supported by solid fundamentals, not unrestrained speculation and excessive optimism as in the bubble period.

Bulls believe that improved corporate governance, government economic reform measures, a low point in the yen exchange rate, active stock buybacks by Japanese companies, and the Japanese stock indexes not reaching bubble territory will continue to drive Japanese stocks higher. Bank of America's chief Japan equity strategist, Masashi Akutsu, raised his year-end forecast for the Nikkei and TOPIX indexes to 41,000 and 2,850 points, respectively, on Monday. He stated that for the Nikkei index, 40,000 points is just a milestone, not the ultimate goal or peak.

However, some analysts believe that, in the long run, the certainty of Japan's economy escaping deflation remains low, and the yen may start to strengthen as the Bank of Japan ends its negative interest rate policy, signs of overheating shown by the Nikkei index could pressure the stock market, presenting short-term correction risks.

Investment banks bullish on Japanese stocks The Nikkei index once created a historical high of 38,915.87 in 1989, which had not been surpassed for 34 years until last Thursday.

Later, due to Japan's economic stability, improved corporate governance, and government economic reform measures, especially under the policies continued by Shinzo Abe (Abenomics) and subsequent governments, along with the yen reaching historical lows against the dollar (about 150 yen to 1 dollar), the Japanese market began to attract more global investors' attention.

Media reports indicate that many fund managers and investors have been flocking to Tokyo over the past 18 months to re-evaluate the potential of the Japanese market. A Bank of America survey this month showed that the net percentage of global fund managers overweight in Japanese stocks has risen to 13%. Tokyo Stock Exchange data shows that foreign investors net bought 378 billion yen of cash equities on the main board of the Tokyo Stock Exchange in the first full trading week of February. This data shows that foreign investors continue to increase their investments in the Japanese stock market after net buying throughout January.

Japan's leading financial institutions are optimistic about the prospects of the Japanese stock market, believing the rise in Japanese stocks is supported by solid fundamentals rather than speculative frenzy. For example, after Thursday's record was broken, Nomura Securities CEO Kentaro Okuda held a press conference on site and assured the world: even at such highs, the Japanese market is still worth buying.

Okuda pointed out that foreign investors appreciate the improvement in Japanese corporate governance. Okuda also mentioned that with the implementation of policies such as "Abenomics" and economic structural adjustments, foreign investors are more confident in Japan's ability to overcome long-term deflation. Although progress in corporate governance and economic reform in Japan takes time, these improvements are now beginning to show results and are sustainable. Therefore, he believes the medium to long-term prospects of the Japanese market are solid.

Additionally, there is a viewpoint that the Nikkei index is far from reaching bubble territory.

In terms of the valuation of the Japanese stock index, analysts believe that the calculation method of the Nikkei 225 index gives excessive weight to a few export-oriented companies. Therefore, the index more reflects the performance of export-driven enterprises rather than the entire Japanese economy. In real value terms (considering inflation), the Nikkei index is still about 14% away from its record high.

The TOPIX index covers a wider range than the Nikkei 225 index, including hundreds of domestically oriented companies and several struggling local banks. To date, the TOPIX index has not reached its historical high of 2,884 points (nominal value) in December 1989, still about 8.5% away.

Nomura Securities analysts have set a target level of 3,050 points for the TOPIX index, and Nomura's chief Japan equity strategist, Yunosuke Ikeda, stated that reaching this new high should be "relatively easy."

Regarding share buybacks, in the past, Japanese companies tended to buy back shares when the market was weak and their stock prices were low. In March last year, the Tokyo Stock Exchange called on companies with a PB below 1 to formulate capital improvement plans, sparking a stock buyback frenzy in the Japanese stock market. Japanese companies bought back shares at a record pace of 9.4 trillion yen over the past year and have already bought back 1.5 trillion yen worth of shares this year to date. Yunosuke Ikeda believes that although the market is not cheap