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After hitting an all-time high for the first time in 34 years in February, Japan’s Nikkei Stock Average hit the key milestone of 40,000 on Monday. The index finished the day 198.41 points higher, marking a 0.5% increase from Friday’s closing at 40,109.23. Leading the surge were semiconductor-related companies such as equipment manufacturers Tokyo Electron and Advantest. Both saw their stocks climb by 2.4% and 3.7%, respectively.
Since the beginning of the year, the Nikkei Stock Average has increased by 19%, following a 28% rise in 2023. On February 22, it closed above its prior record high, set in December 1989.
Japan’s growth benching on semiconductor industry
Japan’s dominance in the chip industry has been declining for decades. In 1989, six of the ten largest chip manufacturers worldwide came from Japan. In 2023, none of the ten chip manufacturers by revenue were Japanese.
The government is now trying to regain its leading role. Last year, the Ministry of Economy, Trade and Industry approved a semiconductor subsidy plan ¥2 tn ($13 bn) to boost the industry. Furthermore, Economy Minister Ken Saito said last month that the Japanese government will provide an additional ¥732 bn ($4.86 bn) in subsidies for Taiwan Semiconductor Manufacturing to expand its plant in the country.
“TSMC is the most important partner for Japan in realising digital transformation, and its Kumamoto factory is an important contributor for us to stably procure cutting-edge logic chips that is extremely essential for the future of industries in Japan,” Saito said at the opening ceremony for the TSMC factory in Kumamoto.
Prime Minister Kishida previously underlined that “Japan’s growth strategy is driven by the semiconductor industry.”
“The Prime Minister’s words reflect the reality that the current trends in the semiconductor industry present Japan with excellent opportunities that the government is actively pursuing,” said Katsunori Ogawa, Chief Portfolio Manager at Japanese asset manager SuMi Trust.
It is worthwhile noting that while the country has lost ground in terms of chip design and manufacturing, it remains highly competitive in chipmaking materials, commanding the top share at 48%. Taiwan ranks second with a distant 16%. In chipmaking equipment, Japan comes in second with 31%, just behind the USA (35%).
