Photo/Illutration An electronic stock board in Tokyo shows the Nikkei 225 index just before closing on Feb. 22. (AP Photo)

Japan’s benchmark Nikkei 225 index continued its upward march on Feb. 22, breaking through its record high set during the “bubble economy” era for the first time in 34 years.

While we should welcome the stock market rally if it reflects an overall recovery of the Japanese economy, the surge could run out of steam if the benefits are biased toward shareholders.

Strong corporate earnings should be distributed more broadly to the workforce.

After reaching 38,915 at the end of 1989, the Nikkei average turned downward and languished for a long time. Following the global financial crisis caused by the 2008 collapse of U.S. investment bank Lehman Brothers, the index dropped to near 7,000 at one time.

The Nikkei started rebounding as a result of the “different dimension” aggressive monetary expansion program initiated by the Bank of Japan in 2013.

After sharp declines during the COVID-19 pandemic, the stock market rise accelerated from the beginning of this year, with the year-to-date gain exceeding 5,000 points.

Market players say foreign investors have been piling into the Tokyo Stock Exchange, acting as the main engine of the spurt.

Indeed, the profits of listed companies have been flying at record-high levels, powered by low interest rates and a weak yen.

Consumer prices have also started picking up, although the upswing was triggered by the higher costs of resources. Still, the trend has raised expectations that the economy will finally and completely escape from its deep deflationary hole.

International investors may have also been drawn to Japanese stocks partly because of uncertainties in the Chinese economy due to its slumping real estate market and growing Beijing-Washington tensions.

Another impetus for betting on Japanese stocks came last year when the TSE called for “management conscious of stock prices.” This prodded many Japanese firms to heighten efforts to increase shareholder returns and has been a major factor driving up the Nikkei, analysts say.

If a corporate focus on the interests of shareholders fuels the current bull market, this shareholder-centric management approach lacks fairness for other stakeholders, such as employees and business partners.

Whether the distribution of profits to the workforce is sufficient should also be questioned.

After all, companies and top executives should not be evaluated solely by stock prices. Toyota Motor Corp.’s market capitalization has exceeded 50 trillion yen, the highest in the history of Japanese companies. But the global auto giant is now busy dealing with repercussions from a series of revelations about regulatory violations at group companies.

Still, it’s true that Japan’s corporate and economic landscapes have significantly changed over the past 34 years.

Companies used to grapple with the “three excesses” of employment, equipment and debt. Now, they are struggling with labor shortages and lagging their overseas rivals in digital investment while amassing hefty amounts of cash reserves.

Looking at the economy as a whole, the decline in the unemployment rate and the growing wave of base wage increases are positive signs.

On the other hand, the nation faces an increasingly pronounced burden from the aging and shrinking population and the gargantuan debt the government has piled up.

To secure stable, sustained economic growth, the government needs to keep taking effective and steady steps to tackle these crucial and intractable challenges.

The current market climb is different from the frenzied investment boom during the asset-price bubble in that it is now accompanied by improved corporate earnings. But there is also a sense of overheating in some areas, such as the semiconductor-related sector, which has been touted as the driving force.

Changes in the financial environment and a weakening of economic growth could shake up the market situation.

Caution is in order against the excesses and sudden changes in the market.

--The Asahi Shimbun, Feb. 23