Japan’s Topix rose, edging toward its highest close since August 1990, as foreign buying and locally driven corporate governance improvements support stocks near levels not seen since the nation’s bubble economy burst.

The benchmark climbed as much as 0.6% to 2,109.21, coming within 1% of surpassing its previous peak reached in September 2021. The Topix is beating the S&P 500 this year on further tailwinds from a resumed weakening of the yen amid the Bank of Japan’s continued easy-money policy, and solid earnings at companies focused on domestic demand.

Warren Buffett’s renewed endorsement of Japanese stocks has provided hope that foreign investment is returning. Overseas traders bought a net $22 billion worth of the nation’s stocks and futures in April, amid record levels of inflows.

“We see a number of reasons to justify a bullish stance on Japanese stocks,” Kazunori Tatebe, a Goldman Sachs strategist, wrote in a note. “Specifically, we note the solid fundamentals compared with stocks on overseas markets, and we also think that expectations for structural changes/reforms could push Japanese equities up even further.”

Rally in Japan Has Another Catalyst in Earnings: Taking Stock

At the same time, a flurry of buybacks is supporting sentiment after the Tokyo Stock Exchange called on companies that are trading below book value to outline capital improvement plans. Mitsubishi Corp. said on May 9 that it plans to buy back up to $2.2 billion worth of its shares. Last month, information-technology firms Hitachi Ltd. and Fujitsu Ltd. announced sizable repurchases.

Sub-gauges tracking firms ranging from steelmakers to airlines are higher this year as investors pick up shares with low valuations and the possibility of improved governance. Even beer stocks are attracting renewed attention on prospects of price hikes, more favorable taxation and a rebound in tourism.

--With assistance from Hideyuki Sano and Yasutaka Tamura.