Foreign investors confident in Japanese economic reform

Strong investment from foreign sources helped send Japanese equity markets back to near record levels on Thursday.

The Nikkei 225 gained 0.3 percent to close at 12,307.37 and the Topix ended the day up by 0.2 percent to 1,252.94.

Foreigners purchased ¥721.9bn ($6.58bn) worth of shares in Japanese companies last week, the ninth week in a row that foreigners were net purchasers of Japanese equities.

In those 9 weeks, foreign buyers have purchased over ¥Y3,000bn ($24.37bn). On the year so far, foreign investors have bought ¥5996bn ($54.7bn) worth of Japanese equities.

Analysts say that foreign investors have taken the position that economic reform will continue no matter which party comes out on top in elections scheduled for September 11 and that the amount of foreign inflows show that investors believe that domestic demand has grown to a point where it can sustain the Japanese economy.

Meanwhile, Goldman Sachs predicted that Prime Minister Junichiro Koizumi would remain in power after the elections and that the ruling LDP would win 241 seats in the lower house of parliament, only 8 fewer than it holds currently.