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Markets

Japan's Nikkei index soars to near 27-year high

Weak yen and optimism drive growth but shares could face sell-off

Investors are encouraged over the weaker yen, with the market on track for solid gains. (Photo by Keiichiro Sato)

TOKYO -- Japan's Nikkei Stock Average on Friday closed just below its highest level in 27 years, thanks to a weak yen and optimism for earnings growth.

The Nikkei ended September's last trading day at 24,120.04, up 1.3% from the previous day. The gains were supported by export-related stocks, amid the decline of the yen against the dollar.

It rose as much as 2% at one point, briefly hitting an interim 27-year high, but fell back during the last moments of trading.

"The weak yen raised expectations for upward revisions of the second-quarter earnings reports, attracting long-term investments as well as short-term," said Masahiro Ishikawa of Sumitomo Mitsui Asset Management.

Norihiro Fujito of Mitsubishi UFJ Morgan Stanley Securities said, "Investors who were selling their assets bought them back." 

Stocks were also helped by news from the U.S.-Japan trade talks on Thursday, where Japan's Prime Minister Shinzo Abe managed to temporarily avoid additional auto tariffs.

If the Nikkei average had gone above the recent peak of 24,129 in January, it would have marked its highest level since November 1991, when the Japanese stocks began their long decline after the collapse of the economic bubble.

The growth rate since the end of last year is 10.5%, higher than other Asian markets including Hang Seng Index, which declined by 6.9%, or the Shanghai Composite Index, which fell by 15.2%. The U.S. Standard & Poor's rose by 8.2%.

After the "bubble economy" collapsed in the early 1990s, the Japanese economy entered a long period of recession. In the late 1990s, a financial crisis hit leading financial companies such as Yamaichi Securities and the Long-Term Credit Bank of Japan. The Nikkei index marked 7,054.98 on March 10, 2009.

The second Abe government began in December 2012, and its so-called Abenomics economic strategy, including an ultra-easy monetary policy, took Japan's stock market into a long upward trend.

Nikkei staff writer Akihide Anzai contributed to this report. 

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