📈 The Nikkei 225 surged 2,065 yen in a single day—the 5th largest daily gain in its history. Closing at 54,720, the index has shattered yet another all-time record, leaving Japan's "Lost Decades" further behind than ever. What triggered this explosive rally? A perfect storm of semiconductor momentum, election-driven trades, and robust corporate earnings made February 3, 2026 a day for the history books.
What Happened on February 3, 2026
The Tokyo Stock Exchange erupted on February 3, 2026. The Nikkei 225 opened sharply higher and never looked back, peaking at a gain of 2,127 yen before settling at 54,720.66—up 2,065.48 yen (3.92%) from the previous day. This eclipsed the prior all-time high of 54,341.23, set just three weeks earlier on January 14.
The 2,065-yen gain ranks as the 5th largest single-day increase in the Nikkei's history. The 3.92% surge was the biggest since October 6, 2025, when Sanae Takaichi's election as Liberal Democratic Party (LDP) president ignited a market frenzy.
Trading volume on the TSE Prime Market hit 7.57 trillion yen. An overwhelming 1,346 stocks rose—more than 80% of listed companies—while only 210 declined. All 33 industry sectors finished in positive territory.
Four Forces Behind the Historic Rally
The Semiconductor Rally Roars Back
Semiconductor and AI-related stocks were the undisputed leaders of the day. Kioxia Holdings jumped 12.7%, Advantest gained 7%, Disco Corp surged 7.1%, and Fujikura climbed 8.6%. Electronic component makers joined the rally, with Sumitomo Electric up 13.07%, Kyocera rising 11.01%, and TDK gaining 10.98%.
The semiconductor sector's outsized influence on the Nikkei cannot be overstated. Four of the index's top five weighted stocks are AI and semiconductor plays, with Advantest alone accounting for roughly 13% of the index's weighting. When these stocks move, the entire market moves with them.
US Market Strength and Yen Weakness
Wall Street provided a tailwind. The Dow Jones Industrial Average rose 1.05% on February 2, buoyed by the ISM Manufacturing Index unexpectedly entering expansion territory—a signal of resilient American economic growth.
Meanwhile, the yen weakened against the dollar, boosting the profit outlook for Japan's export-heavy economy. For sectors like automotive, precision machinery, and semiconductor equipment, a weaker yen directly translates to higher earnings when revenues from overseas are converted back to yen.
Gold Market Panic Subsides
The prior week had seen extraordinary volatility in Japan's gold futures market, with circuit breakers triggered on multiple consecutive days. By February 3, this turbulence had calmed, easing investor anxiety and encouraging a shift from risk-off positioning back into equities.
The "Takaichi Trade" and Election Expectations
Perhaps the most uniquely Japanese factor was the February 8 snap election for the House of Representatives. Polls indicated that the LDP, led by Prime Minister Takaichi, was on track to secure a single-party majority. Markets interpreted this as a continuation—and potential acceleration—of Takaichi's signature expansionary fiscal policy.
The so-called "Takaichi Trade" has been a recurring market theme since her LDP leadership victory in October 2025. Defense-related, infrastructure, and semiconductor stocks have been particular beneficiaries of this trade. Overseas hedge funds were also observed making sustained purchases of index futures throughout the session.
Corporate Earnings: The Foundation Underneath
The rally wasn't built on sentiment alone. Roughly 70% of listed Japanese companies reported profit growth for the April-December period of fiscal 2026, the highest rate in four years.
TDK announced an upward revision to its full-year net profit forecast on February 2, and its shares jumped as much as 12% the following day. Komatsu rose 8% after posting strong results. Even Mitsui & Co., despite a 6% decline in net profit, saw buying as results exceeded market expectations.
Financial stocks also powered higher. Mizuho Financial Group beat quarterly profit estimates and announced an additional share buyback, surging 5.8%. Mitsubishi UFJ Financial rose 4.6% and Sumitomo Mitsui Financial gained 4.4%, as all three megabanks participated in the broad advance.
From the Lost Decades to Uncharted Territory
Understanding this moment requires historical context. On December 29, 1989, the Nikkei 225 peaked at 38,957 during Japan's asset bubble. For over three decades, that number seemed permanently out of reach as the country endured the collapse of real estate prices, a banking crisis, prolonged deflation, and economic stagnation—the era known as the "Lost Decades."
The turning point came in February 2024, when the Nikkei finally surpassed its bubble-era high and broke through 40,000. The ascent from there to 54,000 in roughly two years has been remarkable.
In 2025, the Nikkei posted an annual gain of 26.18%, outperforming both US and European benchmarks. The momentum has carried into 2026, with gains already exceeding 4,000 yen from the year-end close.
Can the Nikkei Reach 60,000?
Most analysts remain bullish. A Nikkei survey of 20 corporate leaders found unanimous expectations for further record highs in 2026, with an average projected peak of 57,350 yen. Nochu-Zenkyoren Asset Management has predicted the index will surpass 60,000 before year-end.
The bullish case rests on corporate earnings growth. Analysts project a 12% increase in operating profits for the fiscal year ending March 2027. At a price-to-earnings ratio of 20, that arithmetic points to a Nikkei level around 60,000.
However, risks remain. The 10-year Japanese government bond yield has climbed to 2.255%, and higher interest rates could weigh on economic activity. The sustainability of the AI and semiconductor boom depends heavily on continued capital spending by hyperscale data center operators. Additionally, US trade policy under the Trump administration—particularly tariff measures—poses a risk to Japan's export-dependent corporations.
Does the Stock Rally Reach Ordinary Japanese?
While the financial pages celebrate new records, a persistent question lingers in Japan: does any of this matter to everyday people?
The average price of a used apartment in Tokyo's 23 wards has surpassed 100 million yen for the first time, yet real wage growth remains modest. The 2026 spring wage negotiations (Shuntō) are expected to deliver significant raises, but whether they can outpace inflation remains uncertain.
The introduction of the new NISA (Nippon Individual Savings Account) system has broadened retail investor participation, but for those without stock holdings, the rally can feel distant—numbers on a screen with no connection to daily life. Whether this stock market prosperity translates into genuine economic vitality and rising living standards will be the true measure of Japan's transformation.
In Japan, reactions to the stock market hitting all-time highs are split between celebration and skepticism—some cheer the returns, while others wonder when the prosperity will reach their wallets. In your country, how wide is the gap between stock market performance and everyday economic reality? We'd love to hear your perspective.
References
- https://www.nikkei.com/article/DGXZQOFL030JS0T00C26A2000000/
- https://www.nikkei.com/article/DGXZQOFL030NETT00C26A2000000/
- https://www.nikkei.com/article/DGXZQOUB030MG0T00C26A2000000/
- https://tradingeconomics.com/japan/stock-market
- https://www.ig.com/jp/news-and-trade-ideas/nikkei225-shows-bullishness-even-after-jpy-gets-stronger-260131
Reactions in Japan
Glad to see it past 54,000, but honestly it's risen too fast this past month. Got a feeling there'll be a sell-off party after the Feb 8 election.
Started new NISA just over a year ago. Unrealized gains now exceed my monthly salary, can only laugh. But getting used to this feeling is what scares me most.
The Nikkei number moves just because of Advantest and SBG. Even with Nikkei at 50,000+, the business sentiment for SMEs is totally different.
Hearing '5th largest gain ever' sounds impressive, but the top 4 were all rebounds after COVID or Lehman. This time it's a pure new high—completely different significance.
My dad bought a Japan stock fund with his retirement money in 2023. He thanks me every month saying 'because you recommended it.' Pure luck though.
The Takaichi Trade pushing stocks up is fine, but if LDP wins big, fiscal discipline gets thrown out the window. 10-year yields at 2.25%—can't ignore that anymore.
Exporters loving the 155 yen level, sure. But import prices stay high, food and gas stay expensive. For people without stocks, it's just a weak-yen hell.
Work at a brokerage—call center was slammed since morning. Flooded with 'Is it too late to buy now?' calls. Looks like the classic top signal to me...
Bubble peak was 38,957 in '89, took 35 years to reach 54,720. Annualized it's modest, but the acceleration over the past 2 years is insane.
Everyone who started new NISA in 2024 is in the green, same for 2025 starters. The gap with people still saying 'too scary to start' keeps widening.
Mizuho up 5.8% after announcing additional buybacks. Feels like a dream compared to Mizuho stock 10 years ago. Never thought megabanks would be treated as growth stocks.
Kioxia up 12% is impressive. Still newly listed but memory demand feels like it's really kicking in. Semiconductors are cyclical though—hard to time the top.
Average used apartment in Tokyo over 100 million yen, Nikkei at 54,000. For someone in their 30s with no stocks or property, it's a parallel universe. Feels like witnessing the final form of inequality.
All 33 sectors up—how long since that happened? Futures short-covering must be involved, but still absurdly strong. Short sellers got absolutely crushed.
Looking at stock prices Japan seems booming, but GDP dropped to 4th behind Germany and population keeps shrinking. Need to soberly assess whether this rally is sustainable.
If this spring's wage negotiations deliver 5%+ raises, that feeds consumption, which boosts corporate earnings—if this virtuous cycle sticks, 60,000 isn't a dream. Big 'if' though.
Overseas investors aren't buying Japan just because it's cheap—they're recognizing TSE's capital efficiency reforms are real. More companies are seriously addressing sub-1x PBR.
Honestly, the global index fund I started dollar-cost averaging in 2024 has the best performance. Meanwhile I keep getting stopped out on individual semiconductor picks. Pathetic.
Wall Street trader here. Five years ago nobody would've believed the Nikkei at this level. TSE governance reforms are real—Japan is no longer a 'value trap.'
From Sweden. Surprised to hear many Japanese remain cautious despite their index being up 40%+ in a year. In the Nordics, investing is taught in school. Cultural difference, I suppose.
As a Shanghai investor, I'll be honest—I'm envious. CSI 300 keeps stagnating while the gap with Japan widens. China stuck in a property crisis while Japan escapes deflation. An ironic contrast.
Analyst in Mumbai. The Nikkei's rise concerns me due to heavy semiconductor concentration. India's Sensex is spread across banking, IT, and consumer sectors—less single-sector risk.
Complicated as a Korean. Japan's semiconductor equipment boom means Korean chipmakers still can't produce without Japanese machines. Japan's grip on upstream technology is formidable.
Managing a Japan equity fund in Frankfurt. Japan still trades at a PE discount to the US, and the ROE improvement story is still early innings. European pension funds are starting to increase Japan allocations.
Work at an Australian super fund. Japanese stocks have delivered 3 straight years of good returns. But yen weakness eats into USD returns, so whether to hedge FX is every fund manager's dilemma.
From Brazil. Fascinating that a shrinking-population country can rally this hard. Japan proves that even with demographic decline, stock prices can rise if companies earn globally.
Financial advisor in Ireland. Been recommending Japan ETFs to clients for 2 years. They were skeptical at first—'Why Japan?'—but now it's the position they're most grateful for.
As a young Vietnamese investor, I study the Japanese market. Vietnam's VN-Index is still developing, but if we implement institutional reforms like TSE's governance overhaul, foreign investors will come.
From Moscow. Under sanctions, watching Japanese retail investors freely access global markets and buy investment trusts is enviable. I know firsthand how sanctions strip away market participation opportunities.
Asset management in Dubai. Japanese equities are attractive for Middle Eastern sovereign wealth funds too. Japan's tech sector is an ideal diversification play as we move away from oil dependence.
Taiwanese-American here. Japan's equipment makers thrive because TSMC is investing heavily. The Japan-Taiwan semiconductor interdependency deserves more attention in economic security discussions.
Economics journalist in Paris. I'm now embarrassed by articles I wrote saying 'Japan is finished.' The quiet corporate transformation—buybacks, unwinding cross-holdings, ROE focus—runs far deeper than media coverage suggests.
Economist in Mexico City. I'm wary of the 'Takaichi Trade' sustainability. Stocks boosted by a one-time election catalyst risk sharp drops after results. Reminds me of UK markets post-Brexit vote in 2016.
From Warsaw. Poland's WIG20 can't compare in scale or liquidity, but Japan's 30-year deflation escape is invaluable as a case study. The timing of the central bank's policy pivot deserves a textbook chapter.