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It hit an all-time high in late December 1989, mostly on the back of the asset price bubble. The collapse lasted for more than a decade prior to bottoming in 2003 before the index descended (like all global indices) further again amid the global crisis of 2008.
Natural disaster sparked rout
The massive earthquake off the Pacific coast of Tohoku, north-east Japan, in March 2011 marked the beginning of a rout that saw the Nikkei drop throughout that year. While global indices also exhibited choppy behaviour, the safe-haven of the Japanese yen attracted a great deal of capital flow during equity market declines and thus helped to exacerbate the drop in the Japanese index.
Since Japan is the third largest national economy in the world and the fourth largest exporter, the Nikkei tends to benefit greatly from a weak currency. The price-weighted index comprised of Japan's top 225 blue-chip companies on the Tokyo Stock Exchange is heavily weighted towards exporting companies such as Toyota, Canon and Honda so the run upwards has been great news for investors. /
BoJ easing boosted Nikkei surge
Since November 2012 the Nikkei advance has outperformed most world equity markets, surging from 8950 to just shy of the 16,000 level on the promise and subsequent implementation of aggressive monetary easing from the Bank of Japan, in an effort to capture an inflation rate of 2% within two years. So this rally has in part been driven by recent weakness in the yen.
Interestingly, the foreign investor buying stocks directly would have seen profits flattered by the weak yen, with sterling appreciating almost 25% in total against the Asian currency. The 40%-plus year-to-date gains on the Nikkei are reduced substantially unless one removes FX risk by trading via spread betting.