The Japanese Stock Market Just Hit An All-Time High In USD-Terms

Tokyo, Japan
  • Is the Japanese stock market the nightmare of long-term investors?
  • No. Investors who avoided the bubble-period reached a decent 3.9 real return p. a.
  • Because of the currency appreciation, the return was higher in dollar terms.
  • Japanese stocks in USD hit even new all-time high already.

Why Seem Japanese Stocks Like a Nightmare?

But the Japanese stock market seems more a nightmare for many investors because it was moving in a downtrend for decades. The main index, the Nikkei 225, reached a top of 38,916 points by December 29, 1989. Soon, it fell below 30,000 and reached 30,000 only in February 2021 again. “The biggest worry for many long-term investors is a Japan-style decades-long malaise that sees the stock market give you nothing for 30+ years”-wrote the Wealth of Common Sense blog.

Chart 1: The Nikkei 225 Japanese Stock Market Index in the long run
Chart 1: The Nikkei 225 Japanese Stock Market Index in the long run

Chart 1: The Nikkei 225 Japanese Stock Market Index in the long run (

The general sentiment in the press was the Japanese stock market did nothing for 30 years. People who purchased shares there in 1989–1990 gained nothing. Others say if you buy on the top of the bubble, you may need to hold your position for 30 years to see any return. Others use the numbers to illustrate that the equity markets return does not always exceed other investments in the long term.

But Japanese Stock Returns Were Mostly Positive

Japanese yen sign
Japanese yen sign
Yen sign

But the widely used Nikkei 225 index is not suitable for long-term comparisons because it doesn’t contain the income from the dividends. There is a new index, the Nikkei 225 Total Return to solve this problem. Existing since 2011, but calculated retrospectively.

The Effect of 41 Years of Dividends

The Nikkei 225 Total Return Index measures the performance of the Nikkei 225, including both movements in the price and reinvestment of dividend incomes from the component stocks. The index value on December 28, 1979, was 6569.47 (equal to the closing price of the Nikkei 225 price index on the day). (Nikkei Indexes)

Over 41 years of dividends paid out cause a big difference in the returns, in every country. Also, on the Japanese stock market. And 1979 was before the crazy Japanese stock market hype. So, this day, at the end of 1979 seems adequate to make another long-term return comparison.

A Decent Real Return of Japanese Stocks

The return of Japanese, US, German stock market indices, and inflation.
The return of Japanese, US, German stock market indices, and inflation.
The return of Japanese, US, German stock market indices, and inflation.

Surprise-The Nikkei 225 TR Just Hit An All-Time High

Chart 2: Value of the Nikkei 225 Japanese Stock Market Index basket in USD (

End of 1979, the 6569.47 yen Nikkei 225 basket equaled $27.3. Today, the Nikkei 225 Total Return stock portfolio is $438.23 worth (a 16-fold surge.) That is a 7.0 percent annual return, and 3.9 percent real return, in dollar-terms. But the funny fact is, the “common” Nikkei 225, the price index, converted to USD, hit an all-time high in February already (Chart 2). The value of the basket was $289, much lower than the value of the dividend-enhanced version. Buying and holding Japanese stocks was a lucrative venture for foreign investors. Especially with the dividends included.

Are Japanese Stocks Still A Buy?

“After the 1929 U.S. stock market crash, which triggered the Great Depression, share prices regained their pre-collapse highs in 25 years”-wrote Nikkei Asia earlier.

Are Japanese stocks still a good buying target? There are some positive arguments. Japan has so far successfully solved problems of the pandemic, so the infection numbers stay moderate. The Bank of Japan keeps its easing policy, and it is unlikely to change in the next few years. The Japanese economy is benefiting from the progress of other, fast-growing Asian countries like China.

A bull, symbol of surging prices.
A bull, symbol of surging prices.
Bull in the market.

But the valuations of the Japanese shares are also high. The CAPE Ratio (modified P/E ratio or Shiller P/E) was 24.26 on December 31. This indicator reached 33.44 in the USA, but only 22.82 in Canada, 18.1 in China, 14.1 in Hong Kong, and 13.66 in the United Kingdom. (By data of So, it may be easier to find cheap stocks elsewhere.

(Recommended external reading: 14 Fascinating Facts About Japanese Stocks — From 1989)

Indices with Dividends and Without

The world’s major stock market indices can be classified into two major groups, price return (PR) and total return (TR) indices. The most important difference is that TR indexes (like the German DAX) include the positive effect of the dividends paid out. PR indices (such as Nikkei 225, the French CAC 40, or the commonly used S&P 500 version in the US) do not include dividends. Only depict the impact of stock price changes.

Sources of the inflation data: Japan, USA, Germany, Japan (secondary checking)


At the time of writing: I’m long in gold miner stocks, silver, platinum, copper, multinational energy companies, Anglo American, and various cryptocurrencies. Short in the German DAX, and the VIX index.


Originally published at on March 9, 2021.

Finance journalist, blogger, analyst, looking for non-conventional ideas and new perspectives. Engaged in commodities, mining stocks, cryptocurrencies, stocks.

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