Japan’s Nikkei share average scaled a 34-year peak on Friday, recording its best week since March 2022, underpinned by receding bets on an early exit from the Bank of Japan (BOJ) stimulus and sheer momentum as foreign investors returned.

The Nikkei closed Friday’s trading 1.06 per cent higher at 35,422.95, after rising as much as 2.25 per cent to 35,839.65 for the first time since February 1990. The index rallied nearly 7 per cent and marked a multi-decade high every trading day this week.

Technical indicators were flashing warning signs, however, with one such measure - the relative strength index, or RSI - climbing to 74.55 for the Nikkei. Readings above 70 indicate an overheated market.

Nikkei volatility has spiked over the past two days to reach the highest level since Oct. 31, when the BOJ unexpectedly tweaked policy to allow bond yields to rise further.

“It wouldn’t be unusual to see a retracement at any moment of the steepest part of this rally,” Nomura Securities strategist Maki Sawada said, adding that she had expected the Nikkei to decline at Friday’s open.

The rally was supported by receding bets for an end to the BOJ’s negative rate policy at its Jan. 22-23 meeting, following the New Year’s Day earthquake on the Noto peninsula, northwest of Tokyo.

Wages data this week has given further incentive for the central bank to hold fire on any hawkish shift.

At the same time, finance ministry data on Friday showed that foreign investors bought a net 296.2 billion yen ($2.04 billion) of Japanese equities in the week ended Jan.6, following two weeks as net sellers.

So far this year, the Nikkei has climbed 6.3 per cent, the only major global stock index to post gains other than the US S&P 500, which is up 0.21 per cent. Britain’s FTSE lost nearly 2 per cent and Hong Kong’s Hang Seng tumbled 4.43 per cent.

“Foreign investors think the Japanese market is relatively better than other markets: it is not as extended as the US markets, and the economy is better than Europe or China,” said Shinji Abe, an equity strategist at Daiwa Securities.

“Given the current strong momentum, the Nikkei can reach above 36,000 or even get close to 37,000 in the near term.”

Japan’s financial regulator on Friday ordered SBI Securities to halt part of its business related to initial public offerings (IPOs) for a week through Jan. 18 as a penalty for having manipulated clients’ post-IPO share prices.

The Financial Service Agency also ordered the online brokerage unit of financial conglomerate SBI Holdings to improve the group’s compliance.

The Securities and Exchange Surveillance Committee (SESC) has found that SBI aimed to boost opening prices of three stocks for which it served as lead underwriter by asking investor clients to buy shares in them at the offering price, knowing the orders would not reflect market conditions.

SBI said in a statement that the company would take the administrative order seriously and work to beef up its internal compliance to present recurrences and regain public trust.

Meanwhile Japanese government bond (JGB) yields inched higher from session lows on Friday after weak demand at a 30-year bond auction left investors disappointed.

The 30-year JGB yield, which fell to a low of 1.560 earlier in session, inched up to 1.580 per cent after the auction outcome.

“Yields across the curve were on downward trend, but they edged up after the weak outcome,” said Kazuhiko Sano, a strategist at Tokai Tokyo Securities.

“The results were a just little better than the previous auction, which was really bad. I suspect life insurers did not actively buy the bonds.”

The Ministry of Finance’s auction saw the lowest bidding price at 99 yen, lower than the market expectation of around 99.50 yen, Sano said.

The auction received bids worth three times the amount sold, higher than a ratio of 2.62 times in the previous auction.

Overall, the yields were lower than the previous session, amid fading expectations for an early policy tweak from the Bank of Japan (BOJ).

The 10-year JGB yield was at 0.580 per cent before the auction outcome. It later inched up to 0.585 per cent, which was 1.5 basis points (bps) lower than the previous session. The 20-year JGB yield fell 1 bp to 1.300 per cent.

The two-year JGB yield fell 1 bp to 0.010 per cent. The five-year yield fell 1 bp to 0.170 per cent. The 40-year JGB yield fell 0.5 bp to 1.825 per cent.