The Nikkei recorded its largest annual gain for more than 40 years during 2013, as it outperformed other major global markets such as the Dow Jones and the FTSE 100.
It ended the year up 57 per cent higher than at the start of 2013, with the index boosted by a falling value of the yen, which in turn supported Japan's major exporters.
Sony, Panasonic and Sharp are among the success stories of Japan's economy in the last 12 months, with each of the electronics companies returning to profit in 2013 after a long stretch of recording annual losses.
The year 2013 saw the yen slide by as much as 40 per cent against the dollar, providing a boost to exporters such as Sony, Panasonic and Sharp, which sell their products all over the world.
Japanese prime minister Shinzo Abe, who came to power in the Asian nation in 2012, must take some credit for the rise in the Nikkei's value and the improvement in the country's economy.
The Japanese economy had previously struggled as a result of its high levels of debt, but a plan of action dubbed by commentators as 'Abenomics' has helped to turn Japan's finances around.
New central bank boss Haruhiko Kuroda has also contributed to the new mood of optimism surrounding the Japanese economy. He recently spoke of how the country now has a "golden opportunity" to break away from deflation and is aiming to achieve the price stability target of two per cent as early as possible.
But Takuji Aida, Japan analyst at the investment bank Société Générale, speaking to the Guardian, called for a level of caution.
He said: "The implications of using the expressions 'golden opportunity' and 'as early as possible' are strong, and it seems more likely that the Bank of Japan will use the logic of launching additional QE to make the realisation of its view more certain, even if the economic outlook and prices are progressing in line with the central bank's assumptions."
The Nikkei got off to a good start in 2014 by recording a 0.69 per cent rise today (January 2nd).
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