On May 7, 2026, the Nikkei 225 Index rebounded after the long holiday, surging 5.7% to 62,915.87 points, breaking through the 62,000-point mark for the first time, with a total increase of about 25% for the year. However, the market has recently adjusted, closing at 60,815.95 points on May 18.

Structural divergence is evident. The recent rally was mainly driven by concentrated gains in semiconductor and AI concept stocks, with a few heavyweight stocks like SoftBank Group, Tokyo Electron, and Edwan Testing leading the surge, but most individual stocks did not follow suit, and the broader TOPIX index underperformed noticeably. The Nikkei 225 Index significantly outperformed Japan’s weak economic fundamentals, with a coexistence of market prosperity and a sense of decline among residents.

Valuations are at relatively high levels historically. As of May 1, the PE ratio of the Nikkei 225 Index (weighted by total market value) was approximately 19.77 times, with a dividend yield of about 1.44%.

The outlook is cautiously optimistic, but volatility may increase. Haitong International’s research report pointed out that the gains since the beginning of the year have been substantial and the pace of rise has been relatively fast, maintaining a cautiously optimistic view for the future. The market expects the Bank of Japan to possibly raise interest rates in June or July, and the narrowing of the Japan-U.S. interest rate differential could trigger a reversal of carry trades, disrupting the stock market. The medium- to long-term trend depends on the recovery of corporate profitability, the direction of interest rate policies, and the stabilization of the yen exchange rate.