How do current Japanese stock valuations compare to the 1989 bubble era?

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Current Japanese Stock Valuations Are Significantly Lower Than the 1989 Bubble Era

The Japanese stock market, as measured by the Nikkei index, currently presents a valuation profile that is considerably more conservative when compared to the peak of the bubble economy in 1989. While the Nikkei is nearing its historic high, current price-to-earnings (P/E) ratios and overall market capitalization suggest a different market dynamic than experienced over three decades ago.
Nikkei P/E Ratio Stands at 22, a Stark Contrast to the Late 1980s

In the late 1980s, Japanese stocks were trading at exceptionally high price-to-earnings multiples, frequently exceeding 50. This inflated valuation environment was characteristic of the speculative fervor that defined the era. Today, the Nikkei index is trading at a P/E ratio of approximately 22. This figure indicates a more grounded valuation, reflecting a market that, while experiencing a strong rally, has not reached the speculative extremes seen in the past.
Total Market Capitalization Trails Individual Tech Giants

A further illustration of the valuation divergence can be seen in the total market capitalization of the Nikkei index. The entire market capitalization of the Nikkei, valued at ¥680 trillion, is currently less than the combined market capitalization of just two major global technology companies: Apple and Nvidia. This highlights how individual companies in the current global market can command valuations that surpass the collective value of Japan's leading listed corporations, a situation unimaginable during the 1989 bubble.
Investor Sentiment and Corporate Actions Differ Markedly

The prevailing sentiment among investors and the actions of Japanese corporations also mark a significant departure from the 1989 period. In 1989, a widespread, national conviction that Japan's economic dominance was inevitable fueled the bullish sentiment. In contrast, today's market is characterized by global managers seeking to increase their exposure to Japan, driven by performance and more favorable valuations, rather than an overconfident domestic outlook. Furthermore, corporate Japan is actively engaging in market-friendly initiatives, such as record share buybacks, totaling almost US$60 billion last year, and efforts to improve capital management, which were not prominent features of the bubble era.

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How do current Japanese stock valuations compare to the 1989 bubble era?

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