Japan's benchmark Nikkei index achieved a record closing high on Tuesday, rising 1.32% to 52,518.08 points as the outlook for domestic corporate profits improved. This follows Monday's strong performance where the index jumped nearly 3.00% to 51,832.8 points, marking its highest close since October 31 at that time.

Market Performance Overview

The Nikkei has gained 4.00% in the first two trading sessions, taking cues from Wall Street's strength. The broader Topix also closed at a record high, rising 1.75% to 3,538.44 points, building on Monday's 2.01% gain to 3,477.52 points.

Energy and Banking Sectors Lead Rally

Energy stocks emerged as Tuesday's top performers, with refiner Eneos Holdings jumping 5.39% and leading gains in the Topix's oil and coal products index, which surged 4.70% to become the top performer among the Tokyo Stock Exchange's 33 industry sub-indexes. This shift followed U.S. military action that captured Venezuelan President Nicolas Maduro.

The banking sector also posted strong gains, with the bank share index climbing 3.35%. Mizuho Financial Group jumped 5.00%, while Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group each rose nearly 3.00%.

Technology Stocks Continue Strong Performance

Chip-related stocks maintained their momentum from Monday's session, when Advantest jumped 7.84% and Tokyo Electron climbed 7.60%. These gains tracked a 4.00% rise in the U.S. semiconductor index, with technology stocks continuing to show strength across both sessions.

Strong Market Fundamentals Drive Growth

According to Kazunori Tatebe, chief strategist at Daiwa Asset Management, "The fundamental setting for Japanese equities is strong, so that when the market sees positive cues, the appetite grows. These fundamentals are based on the shift from deflation to inflation and corporate governance reform. And domestic investors have become more willing to buy Japanese stocks."

The broad-based rally showed strong market participation, with 84% of the more than 1,600 stocks on the TSE's prime market rising, 13% falling, and 2% trading flat. However, Chubu Electric Power bucked the trend, falling 9.59% to become the worst percentage loser after disclosing possible problems with earthquake standards used at a nuclear plant.

Japan's Nikkei share gauge closed lower on the final trading day of 2025, dragged down by the technology sector that has been a key driver of the year's massive gains. The benchmark Nikkei 225 Index slid 0.40% to close at 50,339.48, while the broader Topix lost 0.50%.

Exceptional Annual Performance Marks Historic Achievement

Despite the final day's decline, the Nikkei secured a remarkable 26% surge for 2025, marking a third consecutive yearly gain and the most substantial increase since 2023. The broader Topix climbed 22% for the year, reflecting the overall strength of Japanese equities throughout the period.

Japanese equities have been on a roll, benefiting from a corporate governance push by the Tokyo Stock Exchange and more recently from euphoria over artificial intelligence investment. The Nikkei reached another milestone, touching an intraday record high of 52,636.87 on November 4, after Sanae Takaichi was elected prime minister on a campaign of huge fiscal stimulus.

Prime Minister Highlights Market Resilience

"The first half of the year was weighed down by global economic instability, including rising prices, labour shortages, and U.S. tariffs," Takaichi said at a ceremony at the exchange after the closing bell. "But in the latter half, the resilience of Japanese companies, together with policy support, propelled the Nikkei to a remarkable turnaround, rising past the 50,000 mark for the first time in history."

Technology Sector Pressures Final Trading Session

Wall Street's main indexes ended lower overnight, as tech stocks retreated from last week's rally that pushed the S&P 500 to record highs. The drop in U.S. equities and a slump by domestic artificial intelligence heavyweight SoftBank Group were the main factors dragging Japanese shares lower, according to Nomura Securities strategist Wataru Akiyama.

"Rather than a fading of expectations around AI, it appears to be driven by end-of-year adjustment selling amid thin trading," Akiyama said. "So, we are not overly concerned, given how much share prices have risen this year."

SoftBank Leads Declines Despite Stellar Annual Performance

SoftBank slid 1.90% and was the biggest drag on the Nikkei, after the company announced it would buy digital infrastructure investor DigitalBridge Group in a deal valued at $4.00 billion. Despite the day's decline, SoftBank shares surged 93% throughout 2025, highlighting the stock's exceptional annual performance.

Market Breadth Reflects End-of-Year Adjustment

Market breadth showed selling pressure with 61 advancers on the Nikkei against 162 decliners, indicating broader profit-taking activity. The trading session reflected typical end-of-year adjustment activity amid thin volumes, as investors concluded a historically strong year for Japanese equities.