TOKYO -- When the Nikkei Stock Average surged past 20,000 on June 2, Yukihiro Kumagai, Japan equity strategist at BNP Paribas Securities Japan, told customers that this semiconductor bull will keep charging.
While auto stocks like Toyota Motor, once the main driver of the Japanese stock market, are sputtering, companies demonstrating their power to innovate and raise prices are now pushing up the benchmark index.
The new market stars include Tokyo Electron, which is in a strong position to benefit from an economy based on the internet of things, PeptiDream, a drug discovery startup, and Morinaga, a confectionery maker seeking to push up prices.
The stock of Tokyo Electron, which is receiving a deluge of orders from computer chipmakers, has doubled since Dec. 1, 2015, the last time the Nikkei index was above 20,000.
The Morinaga stock, which first listed in 1949, has been rising from one record high to another.
Meanwhile, Toyota's stock price fell 22% in the same period.
And unlike in December 2015, Japanese companies are not receiving a big boost from a weak yen. The dollar was trading at 122.86 yen at that time, but now the greenback is fetching 111.56 yen.
Moreover, there are some troubling uncertainties about the outlook of the global economy.
U.S. President Donald Trump on June 1 announced that the U.S. would withdraw from the Paris climate agreement in yet another sign of a growing trend among industrial nations toward focusing on their narrow self-interest, which is creating deep rifts in the world.
Despite the lack of support from external factors and some potentially serious political risks, the Nikkei average has managed to climb above the 20,000 mark for the third time since 2000.
Some analysts are becoming quite bullish about the outlook of the Japanese stock market.
"I wouldn't be surprised if the Nikkei races to 30,000," said Hiroki Tsujimura, chief investment officer at Nikko Asset Management.
Tsujimura notes that Japan Inc.'s return on sales hit an all-time high in the year through March despite a higher yen. "That points to the rising competitiveness of Japanese companies."
The latest U.S. job numbers released on June 2 were weaker than expected, but gave a boost to the U.S. stock market. The three leading indexes -- the Dow Jones Industrial Average, the S&P 500 and the Nasdaq -- all closed at records as investors saw the possibility that the Federal Reserve could slow down the pace of its monetary tightening, according to Yohei Miura of Mitsubishi UFJ Morgan Stanley Securities.
Another factor that is likely to keep the stock market afloat is the continued flow of capital amid easy monetary policies in most major countries.
With Japan's unemployment rate now below 3%, the economic fundamentals at home are also improving.
The Japanese stock market, however, is only at the beginning of a delayed rebound.
If the new zip in the market keeps attracting more investors, the Nikkei will soon start testing 20,868, which was registered in June 2015.