This Nikkei 225 index company just launched a ‘monster’ buyback

Things keep getting better for Japan stocks as the Nikkei 225 index sits near its highest level in over 33 years. The index, which tracks the biggest companies in Japan, has jumped by over 40% since January 2023, making it one of the best performers globally.

Japan stocks have surged even as economists hope that the Bank of Japan (BoJ) will abandon negative interest rates this year. If this happens, it will be the first time that the bank has hiked rates in more than 15 years.

Japan’s rate hikes could, in theory, help some companies in the Nikkei 225 index like banks. Some retailers who import goods worth billions could benefit if the rate hike leads to a stronger performance of the Japanese yen. 

These stocks have also surged because of the actions by the Tokyo Stock Exchange (TSX), which is pushing companies to boost their prices. It seems like these companies are listening after Mitsubishi announced a big share repurchase.

In a statement, the company said that it will buy back shares worth 500 billion yen or $3.4 billion. This is one of the biggest share repurchase plans in Japan, which helped its stock surge by more than 10%. It sits at an all-time high.

Mitsubishi, one of the biggest Japan’s trading companies, is part of Warren Buffett’s portfolio. As such, analysts believe that many other companies will announce their repurchase or dividend programs. 

Mitsubishi is a sprawling conglomerate that has evolved into a private-equity-like company. It owns companies in industries like energy, manufacturing, trading, chemicals, consumer, and materials.

Mitsubishi’s actions will put pressure on the other four trading houses or sogo-shohas, as they are commonly known. These companies include Mitsui, Marubeni, Itochu, and Sumitomo. Like Mitsubishi, they have all jumped to a record high this year.

The companies have delivered excellent returns to Warren Buffett over the years. Mitsubishi shares have surged by over 365% since 2020. The other four have also soared by triple-digits. These gains have helped to offset the depreciating Japanese yen, which has dropped by over 40% in the same period.

The weekly chart shows that the Nikkei 225 index has been in a strong uptrend in the past few years. Most recently, the index crossed the important resistance at ¥33,774, its highest swing on June 19th. 

The index’s rally has been supported by the 50-week moving average while the Relative Strength Index (RSI) has moved close to the overbought point at 70. Therefore, the outlook for the index is bullish as Japanese companies turn to buybacks and dividends. This means that it could jump to ¥38,000 soon.

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