TOKYO -- Japanese stocks have generally performed well over the past three years, as domestic and foreign investors alike embraced Prime Minister Shinzo Abe's economic policy, dubbed Abenomics. But export-related securities have done particularly well, with companies such as Seiko Epson and Alps Electric posting 700%-plus price gains.
The Abenomics-inspired bull market began on Nov. 14, 2012, when then Prime Minister Yoshihiko Noda announced his decision to dissolve the Diet and go to a national poll. This development boosted investors' sentiment because opposition leader Shinzo Abe was tipped to become the next premier. His stock market friendly economic policy had been well publicized by that point.
Since then, the Nikkei Stock Average has more than doubled. It even hit an 18-year high in June.
The top performer among the constituents of the Nikkei 500 Stock Average over the past three years was Seiko Epson, whose share price jumped 780%. Alps Electric and Fuji Heavy Industries also saw significant gains of 760% and 550%, respectively.
Seiko Epson's inkjet printers, featuring large-volume ink cartridges, have been a hit in Southeast Asia. As a key supplier for Apple's iPhones, Alps Electric has benefited from the popularity of the American phone maker.
Other strong gainers also have specific individual reasons for their stock price performance, but they share one big common contributing factor: windfall profit increases stemming from a weaker yen.
The Bank of Japan implemented two unprecedented monetary easing programs, first in April 2013 and then in October 2014. They have helped weaken the Japanese currency from around 80 yen to the dollar three years ago to about 123 yen to the dollar today.
"As the yen's excessive strength has been corrected, the earnings environment for Japanese companies has improved dramatically," said Masaru Hamasaki, head of the market and investment information department at Amundi Japan.
Investors have also poured funds into emerging companies. Information technology-related startups have been a major beneficiary of this trend. MonotaRO, which runs an online tool store, and Cookpad, an online cooking recipe site operator, belong to this group of strong stock performers.
In the second half of the Abenomics-induced bull run in the past three years, investors' focus started shifting toward domestic demand-driven stocks. As companies such as Meiji Holdings and Yamazaki Baking began raising their product prices, investors turned to their stocks in anticipation of improved profit margins.
In addition, domestic demand-driven stocks have gained from growing uncertainties in the global economy, because an increasing number of investors have sought safety in those stocks.
As the yen-dollar rate appears to have found an equilibrium point after the yen's significant slide, a weaker yen is unlikely to contribute to Japanese companies' bottom lines as much as it did in the past three years.
Going forward, the stock market will enter into "a phase where companies have to make efforts, such as raising shareholder returns or boosting investment for the future, to attract investors," said Kazuharu Konishi, chief fund manager at Mitsubishi UFJ Kokusai Asset Management.