Japan's Nikkei stock average rose to its highest level since July 1990 on Monday, buoyed by optimism over a U.S. debt ceiling deal and a weaker yen.
The Nikkei 225 index rose 1.32% to 31,325.84, its highest close since July 20, 1990. The broader Topix index rose 0.96% to 2,166.41.
The Nikkei's rise was led by exporters, which benefit from a weaker yen. The yen fell to a 20-year low against the dollar on Monday, as investors bet that the U.S. Federal Reserve will raise interest rates more aggressively than expected.
A weaker yen makes Japanese exports cheaper for overseas buyers, boosting corporate profits.
The Nikkei's rise also came amid optimism over a U.S. debt ceiling deal. The U.S. House of Representatives and Senate on Sunday reached a deal to raise the debt ceiling, averting a potential default on U.S. debt.
The deal is seen as a positive development for the global economy, as it removes a major source of uncertainty.
The Nikkei's rise is a sign that investors are becoming more optimistic about the global economy. The index has been on a tear in recent months, rising more than 10% since the start of the year.
The Nikkei's rise is also a sign that investors are betting that the Bank of Japan will continue to pursue its ultra-loose monetary policy. The BOJ has said that it will maintain its current policy stance until inflation reaches its 2% target.
The Nikkei's rise is likely to continue in the near term, as investors bet that the global economy will continue to grow and that the BOJ will keep its ultra-loose monetary policy in place.
Analysts' Take
Analysts said the Nikkei's rise was a sign that investors were becoming more optimistic about the global economy.
"The Nikkei's rise is a sign that investors are becoming more optimistic about the global economy," said Masahiro Ichikawa, chief strategist at Sumitomo Mitsui Bank. "The U.S. debt ceiling deal has removed a major source of uncertainty, and the Bank of Japan is likely to continue to pursue its ultra-loose monetary policy."
Ichikawa said the Nikkei's rise is likely to continue in the near term, as investors bet that the global economy will continue to grow and that the BOJ will keep its ultra-loose monetary policy in place.
"The Nikkei is likely to continue to rise in the near term, as investors bet that the global economy will continue to grow and that the BOJ will keep its ultra-loose monetary policy in place," said Ichikawa. "However, the Nikkei is likely to face some resistance at the 32,000 level."
What's Next
Investors will be watching the U.S. Federal Reserve's interest rate decision on Wednesday for clues about the future direction of the global economy.
The Fed is expected to raise interest rates by 50 basis points, which would be the largest increase since 2000. The Fed is also expected to signal that it will continue to raise interest rates at a rapid pace in an effort to combat inflation.
Investors will also be watching the Bank of Japan's monetary policy meeting on Thursday for clues about the future direction of the Japanese economy.
The BOJ is expected to maintain its ultra-loose monetary policy stance, but investors will be watching for any signs that the BOJ is becoming more concerned about inflation.