Is the Nikkei rally unstoppable?

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The Nikkei soared to a 15-year high on Thursday, and with no squalls on the horizon, Japanese stocks are likely to continue sailing higher, say analysts.

"Investors are buying Japanese stocks on the fundamentals," said Mizuho Securities' chief technical strangest Yutaka Miura. "The economy is out of recession, wages look set to rise and corporate earnings growth looks strong," he said. Miura sees the Nikkei testing the 19,500 to 20,000 range around May.

The benchmark Nikkei index tracked the overnight rise in futures to touch a fifteen-year high and closed the day there, at 18,264 - but still far off the all-time high of 39,815 seen on December 29 1989.

After hitting fresh seven-year highs repeatedly in November, Japanese stocks were rangebound in December. In October of last year, a double bazooka shot of additional monetary easing from the Bank of Japan and a larger-than-expected allocation shift to domestic stocks by the Government Pension Investment Fund had triggered a rally that saw the Nikkei soar 15.44 percent in just 25 days.

In addition to improving fundamentals, such as rising exports, the return of stability in the oil markets has also helped drive up stock prices on Wall Street and Tokyo, said Daiwa senior technical analyst Hikaru Sato.

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After sinking steadily in the second half of 2014, Nymex crude oil prices sank to the $40-a-barrel level, but have mostly traded above $50 in February. As of mid-morning Asia trading, crude oil futures were around $50.96 a barrel.

The Dow Jones Industrial Average has gained 5.82 percent and the Nikkei more than 5 percent so far this February.

Daiwa's Sato sees the Nikkei rising to between 19,500 and 20,000 in April and to around 22,000 by this autumn.

Breaking the dollar-yen correlation

One notable difference between the most-recent rally from the preceding ones is the tight correlation between a weaker yen and higher Nikkei stock prices appears to be loosening, analysts noted.

The yen was bought against the dollar Wednesday after the minutes from the Federal Reserve's latest rate-setting meeting dampened hopes for a rate hike in the near future. The yen gained 0.61 percent against the dollar overnight, with the greenback fetching 118.55 yen in Asia trade Thursday morning.

"The weaker yen scenario has run its course. Foreign investors are focused on stronger profitability at Japanese exporters," said Daiwa's Sato. Economic data appear to confirm investors' optimism: exports surged 17 percent on year in January, according to government figures earlier on Thursday.

Still, not everyone is as optimistic about Japanese stocks.

"Japan is no longer a deep value story," said Societe Generale strategists in a note published on Wednesday, citing the broader Topix index's 102 percent gain since the end of 2012 and a price-to-book ratio that has risen from 0.8 to 1.3 times.

"We find limited upside potential in Japanese equities," the bank said, citing an unstable policy mix of aggressive monetary policy easing and continued fiscal tightness, with a consumption tax hike in the pipeline for 2017, which may dampen consumer spirits, and potentially "not enough structural reform" on the cards to boost the economy.