Japan’s Topix index has hit a record high, showing strong performance across nearly all Prime Market stocks. The Topix is a key indicator of Japan’s stock market, and during morning trading, Japanese equities surged, pushing the Topix to its peak. The Nikkei 225 also saw an increase of 1.4%.

Impact of Political Changes

The resignation of Prime Minister Ishiba has had a positive effect on the stock markets. Furthermore, the weaker yen has made Japanese stocks more appealing to foreign investors. Notably, the GBP/JPY and EUR/JPY currency pairs have also reached their highest levels in 12 months. Recent economic data is favorable; Q2 GDP rose by 0.5% from the previous quarter, compared to an earlier estimate of 0.3%. The TOPIX index represents about 1,800 stocks from the TSE Prime Market and is weighted by market capitalization, providing a broad view of Japanese companies. In contrast, the price-weighted Nikkei 225 consists of 225 selected firms but is more vulnerable to market fluctuations due to its reliance on high-priced stocks. Overall, Japan’s financial landscape is evolving, driven by political changes and positive economic data. With the Topix surpassing its all-time high from 1989, we can expect greater momentum in Japanese equities. The weak yen, resulting from political stability and expectations of supportive policies, serves as a strong boost for the market. Investors may want to adopt bullish strategies, preparing for further gains in major Japanese indices in the weeks ahead. The yen’s decline has pushed the USD/JPY pair above 165, marking a multi-decade high and creating a focal point for currency traders. Considering buying call options on USD/JPY and EUR/JPY could allow profits from ongoing yen weakness. A declining yen increases profits for Japan’s large exporters, likely lifting the overall stock market as well.

The Role of Foreign Investment

The political shift and solid Q2 GDP growth create a strong foundation for this market rally. Recent data from the Ministry of Finance in August 2025 revealed that foreign investors were buying Japanese stocks, investing over ¥2.1 trillion into the market, a trend we anticipate will continue. Selling out-of-the-money put options on the Topix index could be an effective way to collect premiums while betting on market stability or ongoing growth. When choosing an index, it’s crucial to understand the differences between Topix and Nikkei 225. The broader Topix offers a more accurate picture of the entire market and is suitable for stable, long-term investments. On the other hand, the more volatile, price-weighted Nikkei 225 may provide better opportunities for short-term traders looking to benefit from significant price fluctuations. We saw a similar trend in the early 2010s during Abenomics when the weak yen drove a bull market in stocks. The Bank of Japan has indicated that any policy normalization will be gradual, which should continue to support this environment. Therefore, long-dated call options on Japanese equity ETFs might be a wise choice for maintaining exposure to this trend. Create your live VT Markets account and start trading now.

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