Japan's stock market hits five-year high

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Bold investors reap rewards as Nikkei hits 14,000 for the first time since June 2008.

Investors in the Japanese stock market have reason to cheer this morning as the benchmark Nikkei index burst through the 14,000 mark for the first time in five years. The market is now up by 36pc since the start of the year.

The market was buoyed by last month's announcement that the Bank of Japan would significantly increase its monetary policy stimulus, doubling money supply to kick-start the economy. The Nikkei was boosted further by the European Central Bank cutting interest rates last week to a historic low of 0.5pc and the Australian central bank cutting interest rates to 50-year lows of 2.75pc.

As the stock market strengthened, the Japanese currency weakened which is good news for the economy. One US dollar will now buy you 99 yen, up from 98 yen last week. A weaker currency will boost Japan's export market as it becomes cheaper to do business with the nation.

Japan's main export business is making cars, and car manufacturers have seen their share price rise in recent months. Toyota Motor shares rose by 4.9pc on Tuesday following news that the company would announce profit growth for the year ending March 31. Nissan Motors (Other OTC: NSANF - news) also saw its shares increase, by 3.9pc.

Japan funds returned most for British investors in March . Investors in Japan saw profits of up to 14pc in just one month accounting for nine of the 10 top performing funds. Legg Mason Japan Equity was the top performer across all sectors in March, returning investors 14.3pc.

Invesco Perpetual Japanese Smaller Companies was a close second, returning 11.3pc. Axa Framlington Biotech, which returned 6.3pc, was the only fund in the top 10 not focused on Japan.

Nathan Gibbs, manager of the Schroder Japan Alpha Plus fund, said the combination of Japan's new monetary policies, the apparent change in attitude of the Bank of Japan and the prospect of further changes to policy in the future was sufficient to produce a strongly positive initial reaction in markets.

Coutts Private Bank foreign exchange analyst said that further yen weakness is likely as Japanese investors seek to rebalance their portfolios but we expect this to be more gradual.