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Investing.com-- Japan’s Nikkei 225 index rose to a record high in early trade on Thursday, tracking overnight gains in Wall Street after Federal Reserve Chair Jerome Powell offered the clearest sign yet that interest rates were coming in 2024.
Speculation over a potential policy pivot by the Bank of Japan also benefited heavyweight bank stocks, while a rally in the technology sector appeared to be cooling.
The Nikkei 225 rose as much as 0.6% to a record high of 40,499.0 points just after the open. The index had tread water for the past two sessions after blazing past the 40,000 level for the first time ever earlier this week.
While a rally in technology had largely driven the Nikkei’s recent rally, Thursday’s gains were driven more by industrial and financial stocks.
Kawasaki Heavy Industries, Ltd. (TYO:7012) rose 8.3% and was the top gainer on the index, while megabank Sumitomo Mitsui (NYSE:SMFG) Financial (TYO:8316) rose nearly 4%.
Japanese stocks took a positive lead-in from Wall Street, with U.S. stock indexes closing higher overnight after Fed Chair Jerome Powell said that the bank will eventually cut interest rates in 2024.
While Powell did not provide any clear cues on the scale and timing of the cuts, markets still rose on hopes of lower lending rates this year.
In Japan, heavyweight bank stocks were boosted by increasing bets that the BOJ was close to ending its ultra-low interest rate regime.
Shares of Mitsubishi UFJ (NYSE:MUFG) Financial Group Inc (TYO:8306)- the country’s biggest bank- rose 1.8%, while Resona Holdings, Inc. (TYO:8308) added 3.4%.
Official data released on Thursday showed average cash earnings of Japanese employees rose a bigger-than-expected 2% in January. Other data also showed that real wages fell at their slowest pace in 13 months.
Stronger wages are one of the main factors being considered by the BOJ in hiking interest rates for the first time since 2007.
The central bank is pegged to raise rates by as soon as March or April in 2024.
