Japan stocks have been on fire since the Bank of Japan (BoJ) provided fresh ammunition to stimulate the economy, raising questions over whether the rally is sustainable beyond short-term euphoria.
The benchmark Nikkei 225 jumped 3.8 percent to 17,028 on Tuesday, its highest level since October 2007, extending Friday's 4.8 percent rally. Japan markets were closed for a national holiday on Monday.
"It absolutely is the real deal, at least for the moment," Daniel Wiener, CEO of Adviser Investments told CNBC.
"You have a sea change in the concept of risk. The government pension fund has said we're going to buy more equities and we're going to cut down on purchases of fixed income...and the market is following suit," he said.
Following the BoJ's announcement that it will expand its quantitative easing program on Friday, Japan's largest pension fund unveiled a new allocation strategy, ramping up its exposure to risky assets.
Under the new guidelines, Japanese stocks and foreign stocks will account for 25 percent of the Government Pension Investment Fund's holdings, up from 12 percent each previously. The fund will put 35 percent of its money in domestic bonds, down from 60 percent, while the ratio for overseas bonds will rise to 15 percent from 11 percent.
Jesper Koll, managing director and head of Japanese equity research at JPMorgan Securities Japan is also confident the market rally has legs.
"You do have euphoria obviously," Koll said. "But, Japan is in a structural bull market. We started in the summer of 2012, and we're less than half way done."