Happy Easter. Gold takes the spotlight once again as much of the world takes a break from markets during this Monday holiday. Prices are already up over one percent at the time of writing, pushed as high as $2,260 an ounce during the Asian morning session. Given the effects of time differences and market closures in the western hemisphere, one can only conclude that Asia is the main driver behind the recent surge in bullion prices. The People’s Bank of China was the largest buyer of gold last year amongst all other central banks but demand also remained high with private investors, many of whom are seeking safe-haven assets in light of the precarious situation in the Chinese property market.

Some promising data out of China yesterday in the form of the country’s National Bureau of Statistics PMI numbers. The manufacturing PMI in particular made for pleasant reading, coming in at 50.8 as opposed to the predicted 49.9, meaning the sector is officially in expansion as opposed to contraction. The figures were backed up this morning by the release of the Caixin manufacturing numbers, also coming in above expectations at 51.1, further confirming an expanding manufacturing sector.

Looking forward to the week ahead, we start the week with a slew of European PMI data, followed by Eurozone CPI and inflation data on Wednesday. Further down the line, we have US Jobless claims on Thursday before finally ending the week with Non-Farm Payrolls on Friday. A reminder that markets in China will be closed at the end of this week to observe Tomb Sweeping festivities.

For many, the term “financial centre” usually conjures up a very specific selection of cities: London, New York, Singapore, Shanghai, Tokyo, etc. But how did these cities come to occupy such a place? How long have they held such a mantle? In this article, we will look into how these cities rose to prominence.

We have to go back to the Middle Ages, to the city-states of Northern Italy, before we get to something resembling modern banking. Venice was ideally situated to act as a hub for Mediterranean trade. Due to its close relations with the Byzantine Empire, it was able to trade wine, grain, salt from Southern Europe in exchange for silks and spices from Constantinople. Not only that, but they were able to do so while paying little or no customs in the process. Unsurprisingly, this would generate an enormous amount of wealth for the city-state and would carry on for centuries.

Thanks to the grain trade, many novel banking tools were developed. For example, farmers could take out a loan from a bank and use the money to sow their fields. Later on, the harvest would act as repayment for the loan. In this way, the bank essentially had future rights to the grain. The bank would then go on to collect payments for the as-of-yet unharvested grain from foreign trading ports, a template for futures contracts widely used in finance to this day. Insurance would also become ubiquitous around this time, ensuring the grain trade could persist despite the ever-present threats of floods, drought, pestilence and war. Happy days.

In the 15th century, the Byzantine Empire was forced out of Constantinople and the Ottoman Empire took its place. This would mark the start of the declining influence of Venice and surrounding areas. Trade with the East became more difficult during this time, but luckily the Gibraltar Strait would open up and with it, access to Northern European ports. The financial centre of Europe would gradually shift to the Flanders and Netherlands regions, which had even greater reach. Ports in the Low Countries had access to the Americas, West Africa, Japan and all other major trading hubs of the time.

Besides geographical reach, the Netherlands’ other strong advantage was that of financial innovation. These innovations resulted from the difficulty of international trade at the time. Trade voyages to the other side of the world were extremely expensive and wrought with peril. Building, supplying and staffing a ship was a barrier to entry only the deepest pockets could overcome. To mitigate the risk, the Dutch had a pretty neat solution. Instead of a single entity financing the whole voyage, the endeavour was divided into shares. Companies and investment firms could purchase these shares and in doing so, possess a partial stake in the enterprise. In the event of a successful journey, profits were shared equally. In the event of failure, losses were not bankrupting. This is how the joint-stock company came into being and with it, the template for modern stock markets.

Eventually the various mercantile players would consolidate to form the Dutch East India Company in 1602, the size and scope of which would make the likes of Apple or Google look like a local corner shop today. Imagine a company with its own globe-spanning navy. Across the channel, in London, a similar venture had already begun a couple of years prior. Although the British and Dutch East India Companies would start around the same time, the latter was much better established and well-funded than the former. We’ll spare the reader too much of a history lesson but eventually the British counterpart won out and became the dominant player. Combined with the global balance of power shifting towards Britain, France, and to a lesser extent the Americas, Dutch influence over world trade slowly dwindled and by the early 1800s, London was the world’s de facto financial centre.

The banking practices that were first developed in Amsterdam spread to London where they were further refined. It was during this time that international finance began in earnest, with English contract law becoming the standard for financial agreements throughout the world. It remains the largest financial centre for numerous markets to this day, including derivative markets, forex markets, international bank lending, international insurance and the trading of base metals.

As the century progressed, the world became increasingly interconnected and multipolar. The first transatlantic cable was laid between London and New York in 1866; communication networks improved dramatically with the advent of the telephone; railways connected the far corners of the world. Free trade and capital flows were greatly facilitated, making international investments more feasible than at any other time in history.

By the 1870s, the world financial system was in the firm grip of globalisation. This had the inevitable effect of drawing power away from the traditional centres of London and Paris, spreading to New York, Berlin and a number of European cities. The First and Second World Wars would diminish Europe’s influence over international finance in favour of the United States. To this day, New York remains the home of the two biggest stock exchanges in the world, the three major global credit rating agencies, a vast number of hedge funds and investment banks, as well as the largest financial centre for public and private equities.

The end of the Second World War marked the start of the Japanese economic miracle that would culminate in Tokyo becoming a world financial centre in the 1980s. This waxing influence would then go on to spread throughout the Far East. Singapore and Hong Kong, ideally situated to capitalise on the explosive economic growth in Asia would quickly attain the same status. The rise of the Chinese economy would in turn rapidly establish Shanghai as its representative on the world financial stage. Even more recently, we have seen markets shift yet again, this time towards Central and Southern Asia, as well as the Middle East, in the financial centres of Astana, Mumbai and Dubai.

The growing number and geographic spread of financial centres may offer a reflection of the increasingly multipolar world we live in. When Venice established itself as the financial hub of the Mediterranean, it remained as such for the better part of a thousand years. Some things change; some things don’t. Financial centres may have shuffled around over the years. As for the activities they are renowned for? Not so much. At the end of the day, we buy and sell things to one another in much the same way as we always have. Even some of the more complicated financial instruments are in fact far older than one might expect. Perhaps the crypto revolution can shake things up a bit.

The Dollar Currency Index serves as a crucial metric for establishing the relative strength of the US Dollar within a wider macroeconomic landscape. The DXY, or Dixie as it is sometimes referred to, offers instant insight on the performance of the Dollar compared to other currencies. Let us take a closer look at it.

BRETTON WOODS

As with many things, the World Wars were the spark that set things in motion. After the First World War, Europe lay in ruins; it was time to rebuild. The Treaty of Versailles, written by the victorious parties, essentially passed the entire bill of the conflict to Germany, inevitably bankrupting them. This was a major contributing factor to the advent of the Second World War, which would lead to similarly destructive consequences in Europe and further afield.

Determined not to repeat the “beggar thy neighbour” policies of the past, economists and leaders from around the world set out to establish an international monetary framework as the basis for reconstruction. During the closing stages of the war, delegates gathered at Bretton Woods, New Hampshire, to establish how the new financial system would function:

- Firstly, the US Dollar would be fixed to $35 per troy ounce of gold

- Secondly, each member country of the agreement would guarantee convertibility of their own money to the Dollar according to pre-established currency pegs.

 The above would result in the USD becoming the de facto world reserve currency. As an addendum, the conference also resulted in the creation of the International Monetary Fund (IMF) as well as other entities that would go on to form the World Bank.

Over the next few decades, the system worked incredibly well. Perhaps a little too well. Due to its convertibility to gold, the Dollar became very attractive, both domestically and internationally. To keep pace with increased demand, more Dollars were printed. So much so that by the 1970s, there were four times more Dollars in circulation than could be backed up by the gold reserves of the time. This meant that the Dollar was extremely overvalued, which was a problem in its own right, but led to the other issue of huge gold outflows out of the US.

By the time Richard Nixon took office, the situation was untenable. The system that was arguably responsible for post-war economic stability and growth had to go. The Bretton Woods system was abandoned and the Dollar taken off the gold standard. This created a problem: by severing the tether between the Dollar and gold, suddenly there was nothing to properly ground the value of the American currency, and by extension, every other currency pegged to it.

THE DXY

If a currency is not tied to anything, then what gives it value? The many answers to this question fall outside of the scope of this article so let us turn instead to the answer provided by the Federal Reserve. Their solution to this new problem was to create an index that weighed the strength of the Dollar against the currencies of the US’ most common trading partners.

At the time of its implementation in 1973, this meant the inclusion of the following 10 currencies: the Japanese Yen, the Canadian Dollar, the Deutschmark, the Pound Sterling, the Italian Lira, the Dutch Guilder, the Swedish Krona and the French, Belgian and Swiss Francs. After the adoption of the Euro by many European nations around the turn of the millennium, the basket consolidated from 10 currencies down to the current six according to the following ratio:



Taking the above weightings into account, the formula for calculating the DXY is as follows:



One may notice the negative exponent for the Euro and Cable. We leave the reasoning as to why as an exercise for the reader. The purpose of the constant is to peg the first calculation to a value of 100. The index is therefore to be read as follows: a value below 100 is to be understood as an indication of a weak Dollar; and the obvious corollary.

Although established by the Fed, the task of calculating the DXY currently falls to the Intercontinental Exchange (ICE), which introduced a tradeable futures contract tied to the index back in 1985. It would be during this very year that the DXY printed its highest ever value, coming in just shy of 164.

In contrast, the period surrounding the 2008 financial crisis was characterised by lower interest rates in the US compared to other countries, comparatively devaluing the Dollar and causing the DXY to fall as low as 70 in the first half of that year.

CRITICISM

The index has not changed in its composition since its introduction half a century ago. The Euro merely substituted the currencies it replaced, taking their combined weighting as its own. This is the source of much of the criticism currently levelled against the DXY. The world has changed considerably since 1973, economically and otherwise. Let us remind ourselves that the currency basket of the DXY was defined by the largest trading partners of the United States at the time, which as of 2021 stood as follows:



As we can see, the composition of the DXY doesn’t follow the above chart at all. Despite making up 57% of the weighting of the basket, the truth is that only 15% of US trade occurred with Eurozone countries. Meanwhile, due to its strongly emergent economy and solid manufacturing base, trade with Mexico continues to ramp up, now challenging China and Canada for the top spot.

If the index is meant to be a reflection of the strength of the Dollar on the world stage, then why does it not include the Mexican Peso, or indeed the Chinese Renminbi, or even the Korean Won? Conversely, and with absolutely no offense to Sweden, is the inclusion of the Swedish Krona really justified in this day and age?

The other, perhaps more fundamental criticism, is that none of this matters because none of the currencies mentioned in this article have any inherent value anyway. By definition, the DXY tells us the relative value of the Dollar compared to other currencies. The problem being that all of these currencies are locked in a race to the bottom, relentlessly eroded by inflation, year after year. 35 bucks certainly won’t buy an ounce of gold anymore.

Overly harsh criticism no doubt. The DXY remains ubiquitous in the financial world in no small part because of its use to traders. Given that the USD is on one side of almost 90% of all forex trades, it can more than justify its own index. Although perhaps one more grounded in the present day.

On occasion, during a brief whimsical moment, you may focus your attention on a coin and wonder how many times that round piece of metal has changed hands before ending up in the palm of your own. You look at the mint date, raising your eyebrows almost imperceptibly, vaguely taking note. The moment passes.

A single coin, used in innumerable transactions, fungible and yet unique in its own right. But what is it really? After all, the physical coin is just a tool, no more than a means of exchange. How old is the money itself? How long has this particular currency been in circulation? The sobering answer is that many currencies have outlived centuries worth of political strife. They are an unnoticed and underappreciated element of stability for nation states and empires alike; an age-spanning constant. Let us take a closer look at the three oldest still in circulation today.

1. 3. Serbian Dinar

Let’s get the weird one over with first. Number three on the list is none other than the Serbian Dinar. You heard that right. A country that most people would struggle to point to on a map has one of the oldest currencies in the world. Its usage dates back to the thirteenth century, to 1214 if historical records are to be trusted.

Serbian Dinars were silver coins heavily inspired by the nearby Venetian currency, which were in turn derived from Roman coinage. For some reason, Serbian rulers really liked the idea of seeing their face on their coins, so much so that most of them minted their very own pieces of silver bearing their resemblance. Unfortunately, such vanity only persisted for so long before the Ottoman Empire waltzed in and occupied the area for the next four hundred years. History has not been kind to this part of the world.

The Dinar would have to wait until 1868 to make a comeback but it would be short-lived, being replaced by the Yugoslav Dinar in 1920. The Serbian dinar came back to life once again in 2003 after Yugoslavia turned into the State Union of Serbia and Montenegro. Although funnily enough Montenegro decided to adopt the Euro instead. Maybe they thought the Dinar was cursed.

1. 2. Russian Ruble

The second oldest currency is the Russian Ruble and it dates back to roughly the same time frame. The name is said to have come from the word “rubit”, meaning to cut or chop, because Rubles were originally cut from a rod-shaped piece of silver called a Grivna, the standard money of North-Eastern European lands of the time. From its earliest origins, the Ruble has been tied to silver, although the exact conversion rate wouldn’t be standardised until 1704, when Peter the Great reformed the monetary system of the Russian Empire and minted 28-gram silver Ruble coins.

The coins were divisible into 100 copper kopeks, making the Russian Ruble the first ever decimal currency, in stark contrast to the numismatic shenanigans we’ll get to later. The name would go on to survive the Russian revolution of 1917, becoming the currency of the Soviet Union until its eventual collapse in the 1990s, then becoming the currency of the Russian Federation. The “₽” symbol for the Ruble was only officially adopted by the Central Bank of Russia in 2013 following a public poll, in an attempt to emulate the designs of other major currencies.

1. 1. Pound Sterling

Drumroll for the number one oldest currency still in circulation: the Pound Sterling. Astoundingly, usage of the Pound dates back over a millennium to the early dark ages, around the year 800. The Roman Empire had a well-established and well-understood coinage system that spanned the breadth of its territories, including the British Isles. Unfortunately, the typically murky conditions following the fall of Rome in the fifth century are somewhat more difficult to make sense of.

It would take a few hundred years before a new dominant currency would be established, and the credit for this feat is generally attributed to King Offa of Mercia. Besides having a really cool name, Offa’s greatest accomplishment would be the standardised minting of silver pennies in large quantities, the use of which would become widespread throughout his lands. The weight of 240 such silver pennies added up to a Saxon Pound (roughly 350 grams), which is how the weight of a Pound Sterling was first defined. The “£” symbol derives from the upper-case Latin letter “L”, which stands for “Libra”, meaning scales.

Usage of these coins continued relatively uninterrupted over the next few centuries, with subsequent monarchs adding their own little personal touches. The earliest coins were minted from fine silver, which was a problem because pure silver is actually very soft, so these coins weren’t very durable. Henry II changed this in the 12th century by establishing the usage of Sterling silver, defined as 92.5% silver by weight. This metallurgical standard remains in place to this day.

The Penny and Pound wouldn’t be the only units of account to come into being during this time, many of the pre-decimal units also date back centuries. Copying the Carolingian system from the Franks, the Pound was divided into 20 shillings and the Penny into four farthings or two halfpennies. Other insane denominations would follow, including the florin, crown, half-crown, farthing, sovereign and guinea. Decimalisation in 1971 eradicated them all.

The origins of the word Sterling aren’t as clear cut. Some say the term derives from the word “steorling”, meaning “little star”, a design element which featured on the earliest Norman pennies. It’s a nice story so let’s stick with it.

Usage of the Penny and Pound would continue without interruption until the present day, the only real change being the weight of silver the coins represented. Over the course of its existence, the Pound Sterling has been continuously devalued, making up lesser and lesser amounts of silver, up until the present day where it technically isn’t redeemable for anything. Inflation has been around for a long, long time. King Offa is probably spinning in his grave.

Gold is one of the most popular commodities in the world when it comes to trading and it is not difficult to see why. Not only is the gold market very liquid, it is also highly volatile, making it a common favourite for traders worldwide. In fact, it makes up the majority of RADEX MARKETS’ total trading by volume. Moreover, gold has a very tangible quality to it due to its historical and cultural significance; its use as a tradeable asset dates back millennia. It is consistently one of the most heavily traded assets in the world, behind US treasury bills and the S&P 500.

To give an idea of just how large the gold market has become, in 2021 the average trading volumes for gold were in excess of $130 billion per day. If we extrapolate this over the whole year, then the total volume of gold traded was just shy of $50 trillion. An enormous figure to say the least, but there is something even more interesting about it. As of today, roughly 200,000 tonnes of gold have been extracted out of the ground. At a price of $2000 per ounce, this leaves us with gold inventories in the realm of $14 trillion. That is to say, in just one year the world traded three times the entire amount of gold mined throughout history.

An even more startling comparison would be to look at the amount of gold extracted per year, which leaves us with a figure of about 3,000 tonnes. At current prices, this equates to about $200 billion. Meaning that in 2021, the world traded gold contracts worth 250 times the amount of gold extracted out of the ground for that year.

So what? It is not uncommon for derivative markets to become larger than the underlying assets they are based upon. Who cares if one ounce of gold is underpinning a couple orders of magnitude more in derivatives? If we were to perform the same calculations for the crypto market, we would get an even more egregious ratio. The problem, if you can call it that, is that there are effectively two distinct gold markets, and they are subject to different market forces.

In the case of paper contracts, the price of gold is intimately coupled to global markets at large. Geopolitical concerns, federal interest rates, treasury yields, inflation data, currency fluctuations all have a direct and immediate impact on XAUUSD, as many over-leveraged traders are aware.

The price of physical gold bullion on the other hand is still very much at the mercy of traditional supply and demand dynamics. Given the difficulty of transporting and storing physical gold, this can even lead to differences in regional pricing.

Due to longstanding historical practices, the bulk of physical gold trading occurs in the London over the counter (OTC) market. This market benefits from comprehensive storage infrastructure, extensive supplies of gold therein, and trusted custodial services. These factors make it the global hub of the gold trade, attracting roughly two thirds of trading volumes worldwide. It is also ideally situated to bridge the gap between Asian and American time zones.

More recently however, some of these trading volumes have started to flow to other markets, most notably the Shanghai Gold Exchange, now the largest purely physical spot exchange in the world. In late 2020, the price of gold on the SGE fell significantly behind the London price due to low demand during the Covid lockdowns. In 2023, the Shanghai-London spread went the other way, culminating in a $121 premium for Chinese bullion.

All this begs the question: what is the real price of gold? As with anything, the price is what someone else is willing to pay for it. The price of a physical ounce of gold is higher than its paper counterpart, although usually not by much. The spread can increase dramatically during periods of extreme fear and uncertainty, but often quickly returns to mean. The elephant in the room is that the derivatives markets utterly dwarves the physical gold market, and that as a result, the price of the former controls the price of the latter. It is this discrepancy that leads many so-called gold bugs to believe that the price of gold is being artificially supressed.

It is usually at this stage of the conversation that someone brings up the concept of reintroducing a gold-backed currency, often as a theoretical competitor to the US Dollar. A reminder that the USD hasn’t been backed by gold since 1971 (or 1913 depending on whom you ask). If such a system were to become commonplace once again, then each country implementing it would have to secure the gold reserves necessary to do so. If this were to occur, the gold derivatives market would implode overnight, supply and demand dynamics coming to the forefront once again. Maybe the pirates burying gold in the sand knew something we don’t.

On the 29th of December 1989, the Nikkei 225 index hit an all-time high of 38,957 Yen.
It would take 34 years for such a valuation to be surpassed.

The Nikkei 225 derives its name from the Nihon Keizai Shimbun, a Tokyo-based financial newspaper that calculates the index, and the 225 publicly traded Japanese companies that comprise it. The purpose of the index, much like any other stock index, was to act as a barometer for the general health and strength of Japanese markets. Stock trading in Japan was not permitted for several years following the end of the Second World War so when the ban expired there was a renewed appetite surrounding financial markets. Calculation of the Nikkei 225 index started on the 7th of September 1950 and the financial newspaper published the results daily. 70 years later, the index is somewhat more expedient, updating every 5 seconds.

First issue of the newspaper, published in 1876

Although the index went live 1950, it was retroactively calculated to the 16th of May 1949, at a price of 176.21 Yen. The following year would actually see a bear trend culminating in lows of 85.25 in July 1950. This would be the biggest drawdown in relative terms for the next 40 years.

It is impossible to talk about the Nikkei 225 without also talking about the Japanese economy in general. The index fulfilled its purpose well, serving as a reflection of the greater economic performance of the nation. The post-war reconstruction period saw extraordinary growth that would continue unabated for roughly four decades and the Nikkei 225 would mirror this perfectly. True to its purpose, the index would then go on to illustrate the brutal decline the Japanese economy subsequently underwent.

THE RISE

Following its inception, the Nikkei 225 would undergo strong and consistent gains for the remainder of the 1950s, closing at 874 points on the 28th of December 1959. The foundations for rebuilding the Japanese economy were in place, even during this early stage the rocket was primed for take-off. The following decade would continue where the previous left off, almost tripling the valuation of the index all the way up to 2348 Yen by the end of the 1960s. The 70s would see a similar return, tripling the price of the index again to 6569 points. A mere taste of what was to come.

By the 1980s, the main driver of the Japanese economy was its massive export surplus. Japanese products were all the rage and due to a very weak Yen they were very competitively priced, resulting in huge capital flows into Japanese companies. Unfortunately, this created a large trade imbalance between Japan and the Western hemisphere, so much so that worlds leaders met to address and resolve the issue. The ensuing negotiations resulted in the 1985 Plaza accord, the purpose of which was to devalue the USD and restore some semblance of balance to the international trade of goods. The agreement resulted in a rapid appreciation of the Yen, which destroyed the competitive edge of Japanese products, dramatically reducing exports, concluding in a very short-lived recession, known as the Endaka recession.

To counter the recession, the Bank of Japan switched to a policy of monetary easing, which increased access to credit and reduced funding costs. The official discount rate was brought from 5% at the start of 1986 all the way down to 2.5% a year later. The readily available capital allowed companies to expand rapidly, increasing their balance sheets and collateral, which further increased their access to funding, creating a vicious cycle which would massively inflate asset prices. The intricacies of Japanese land tax further exacerbated the problem by creating an extremely illiquid real estate market. This is the time during which fortunes were made, people from all walks of life benefitting from the tremendous wealth that flooded into the Japanese economy. It was the period that Japan became famous for, heavily influencing the culture at the time and serving as the backdrop for a huge quantity of media that continues to be produced to this day.

The above conditions created the perfect breeding grounds for meteoric rises in stock valuations, leading to a parabolic trend in the Nikkei 225. Surely this was too good to be true – a fledgling sentiment of caution began to emerge. The Bank of Japan began to realise something was amiss as early as summer 1988 but their voice was drowned out by the mania of the times. Another year would go by before the BoJ would actively start tightening the money supply by bringing the discount rate back up from 2.5% all the way up to 6%. Unfortunately, this would have no impact on the money supply until the early 90s. Too little, too late. In the meanwhile, the Nikkei 225 continued on its seemingly unstoppable run.

THE FALL

On the final trading day of the decade, the bubble popped. On the 29th of December 1989, the index hit an intra-day high of 38,957.44 before closing the day at 38,915.87 Yen; it had gone up 500% in the last ten years.

The easy money had dried up and there was nothing to prop up valuations any longer. Decades of depreciation would follow. Nine months later the Nikkei 225 had halved, dragging many aspects of the Japanese economy with it. Incredibly, this was just the beginning. It would take another 19 years for it to find a bottom. This came on the 28th of October 2008 with an intra-day low of 6,994.90 Yen, down 82% from its all-time high. Four years of sideways price action would follow before any sense of bullish momentum would return to the index.

The fall in the Nikkei 225 illustrates the collapse of the Japanese economy in general. The following years saw asset prices, company valuations, land prices, GDP and real wages all plummet. Japan’s economic miracle had ended and the Lost Decade swiftly took its place. The Lost Decade eventually became the Lost 20 Years, which in turn became the Lost 30 Years. The Japanese economy would experience anaemic growth during this time, leaving nothing for the subsequent generations entering the workforce. In the same way that the euphoria of the 80s heavily influenced the culture of the nation, so too would the desolation of the 90s. The collapse had a profound impact on Japan, its media, culture, and people.

The performance of the Nikkei is an oddity as far as stock indices are concerned. No other index has followed a path even remotely similar. A 19-year bear market is incredible in itself, but no other stock index in the world can boast all-time highs that persisted for over three decades.

RISE AGAIN

Thirty –four years is a long time, particularly in a nation as historically resilient as Japan. Following the crash, monetary policy makers tried the usual path of low interest rates in order to stimulate borrowing and spending but the confidence in the economy simply was not there. Japanese markets would finally make some headway and in the early 2000s, the Nikkei 225 finally experienced some form of rebound. Unfortunately, the recovery would be short-lived as the global financial crisis of 2008 was just around the corner, undoing much of the fragile growth achieved since the turn of the century.

The economic recovery had experienced a significant setback but was not defeated just yet. The stagnation endured until the Bank of Japan started down the more aggressive route of purchasing government bonds and exchange traded funds in 2013. The policy fell in line with the more encompassing “Abenomics”, named after Prime Minister Shinzo Abe, who sought to address the problems that had beleaguered the Japanese economy for over twenty years at that point. Such measures would finally give Japanese markets the confidence they needed to emerge out of their decades-long slump, this time for good. The BoJ’s aggressive stock buying programme continued and such measures are arguably responsible for a significant portion of the subsequent growth in the Nikkei 225 index. The central bank is in fact now the largest owner of Japanese stocks, with valuations in the ballpark of half a trillion USD.

In 2013 alone, the Nikkei 225 would increase in value by over 50%. Over the next ten years, it would continue to climb with only minor setbacks along the way. In 2023, the index would close out the year 28% higher and put it within striking distance of its former all-time high. Less than two months into 2024, on the 22nd of February, it achieved exactly that.

The Nikkei 225, emblematic of the fall from the dizzying heights of the roaring 80s, has clawed its way back to the top after 34 long years. The achievement needs no embellishment.