The momentum continues! The Nikkei 225 index breaks through the 40,000 point mark for the first time.

The Japanese Nikkei 225 index has broken through the psychological barrier of 40,000 points for the first time, opening the door for further historical rally. On Monday, the blue-chip stock index rose by 0.90% to 40,299.00 points, hitting a new intraday high. Technology stocks, including chip manufacturing equipment maker Tokyo Electron, performed the best, helping to drive the market up over the past year. The broader TOPIX index also rose, but still about 6% below the record high set before the bursting of the Japanese asset price bubble over 30 years ago. Both the Nikkei index and TOPIX index were supported by US consumer data. Strong US consumer data has strengthened expectations for the earliest possible rate cut by the Federal Reserve in June, which is positive for global market confidence. "When the market reaches record levels, they tend to stay within a range," said Daiju Aoki, Chief Investment Officer for Tokyo at UBS Sumi Trust Wealth Management Co. "The Nikkei index reaching 40,000 points indicates that many investors, especially foreign investors, still have confidence in the Japanese stock market." Last month, the Nikkei index returned to its 1989 high. Strong shareholder returns, a weakening yen, and growing corporate profits have attracted global investors to some of Japan's largest companies. Additionally, Warren Buffett's support of a Japanese trading company last year has boosted confidence in the Japanese market. Although the Nikkei index has retraced slightly since reaching this milestone on February 22, with profit-taking from investors and some analysts surprised by the speed of the rally, the downside for the index remains limited as investors continue to buy on dips. Foreign investors continue to be bullish on the Japanese stock market. The world's largest asset management company, BlackRock, and Europe's largest fund management company, Amundi Asset Management, expect the strong momentum to continue with changes in governance of CKH Holdings. The Tokyo Stock Exchange is encouraging companies to publish reports on plans to raise stock valuations. Some companies have already announced stock buybacks and increased dividends. Management buyouts are increasing, and activist investors are also taking action. About one-third of the Nikkei index components besides the financial sector have a net cash position, meaning they have more cash than debt, supporting the arguments of activist investors and the Tokyo Stock Exchange. This is roughly twice the comparable data of the S&P 500 index. Charu Chanana, a strategist at Singapore's Sincere Capital Markets, said, "The Nikkei 225 index reaching 40,000 points is definitely a key psychological barrier, which could bring some resistance and volatility to the index. However, when structural factors remain favorable and the yen continues to weaken, this could be more of a bullish signal rather than exacerbating concerns of overbought in the Japanese stock market."