Japan's stock market is booming, but does this rally have staying power?

We've seen this before in the past, in that every decade or so we will have a period in Japan

where everything aligns the right way and suddenly becomes a lot easier to make money on the alongside.

I'm Allison Nathan and colleague in Goldman Sachs research. in Japan's equity markets and the state of the country's economy is my colleague

in Goldman Sachs research Bruce Kirk, our chief Japan equity strategist.

Bruce, I think it's the first time that we've had you on this program, so welcome to the program.

Thank you very much for having me.

So it's been a long time since we've focused on Japan on this

podcast, but one of the surprise performances of the year has been

Japanese stocks, the Tokyo Price Index, otherwise known as Topix, has recently hit its highest point since August 1990.

So what's been driving that performance? Tell us a bit about what you're seeing.

One of the main drivers of performance that we have seen is the fact that after a period of seven years

when foreigners have been net sellers of Japan to the tune of about 27 trillion

yen. They're finally starting to come back and re-address the underweight position that they've

had on Japan. What's making them come back? I think one of

the main factors has been the corporate governance reforms that have been pushed by

the Tokyo Stock Exchange since January this year.

The Tokyo Stock Exchange came out with a presentation in January

where it laid out the fact that it wanted companies that

traded below book value in Japan, so a price to book of one times or less, to boost their corporate value.

It's significant because half of the market in Japan trades below book value.

We're suddenly starting to see the value unlock in Japan that people have been

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