From Nasdaq:

Japan’s Nikkei share average had its best January in 26 years, with a 7.77% gain, the highest among major stock indices globally. The index closed at 36,286.71, up 0.61% for the day. Analysts believe the Nikkei may hit 40,000 by year-end due to companies getting out of deflation and raising prices, leading to higher margins.

Foreign investor flows out of China, a weak yen, and excitement over corporate governance reforms have contributed to the Nikkei’s performance. The relative strength index (RSI) shows a more balanced market, with a current value near 67 after exceeding 76 last week, suggesting overbought conditions. The market is not as overheated as indicators previously showed.

Earnings season in Japan has produced winners like Komatsu and Canon, which jumped 8.6% and 7.9%, respectively. Tokyo Electron, Advantest, and SoftBank Group saw minor losses. Some 319 companies are announcing earnings on Wednesday, with the season’s peak expected in mid-February.

Companies have been raising prices in Japan, which is expected to lead to higher margins and better earnings. Kenji Abe, an equity strategist at Daiwa Securities, projects that the Nikkei will reach 40,000 by year-end. Analysts believe the earnings overall should be better than last year, with Japan getting out of deflation after 30 years.



Read more: Japan’s Nikkei shakes off chip blues to post best January since 1998