(Bloomberg) -- Japanese stocks rounded out their biggest yearly gains in a decade as the weak yen, corporate governance reforms and signs of sustained inflation lured buyers. 

The benchmark Topix posted an annual return of 25%, and the Nikkei 225 Stock Average rallied 28%. That’s the best performance for both gauges since 2013, when aggressive monetary and fiscal easing policies fueled hopes of a turnaround in the third-largest economy. 

The world-beating indexes ended the year near the highest since 1990, boosted by investors seeking alternatives to Chinese equities and authorities’ push for companies to improve value. The slump in Japan’s currency helped boost profits of exporters such as carmakers. Warren Buffett’s renewed endorsement drove trading houses’ shares to record highs. 

“Japan’s stock rally this year is really quite meaningful,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. “It’s a sign that we’re finally returning to a normal situation, a non-deflationary environment where the Bank of Japan’s monetary policy easing has likely supported the market.” 

Investors may become even more bullish into 2024 given that the currency remains relatively cheap and corporate earnings have become less susceptible to foreign-exchange fluctuations, though some are cautious about near-term risks given lackluster consumer spending and signs yen weakness may be over.

The Topix gained 0.2%, while the Nikkei 225 slipped 0.2% on Friday, the last trading day of the year. 

Japan’s equity gains this year have still outpaced peers in Asia. The MSCI Asia-Pacific Index rose less than 9% as investors fretted about a slowdown in Chinese growth, as well as lingering geopolitical tensions, regulatory risks and fears of state meddling in the world’s No. 2 economy. 

This year’s rally is the best since the Topix jumped 51% in 2013 on optimism that Prime Minister Shinzo Abe’s policies, dubbed Abenomics, would give a much-needed jolt to the economy. Those hopes faded in the ensuing years, especially as the Covid-19 pandemic stymied Abe’s goal of ending deflation.

Now though, there are finally signs of sustainable inflation, which has been above the central bank’s 2% target for more than a year and half.

Financial stocks in particular have been beneficiaries of optimism banks’ lending margins will improve. The sector has outperformed the broader Topix since the BOJ’s shock move to loosen its hold on yields just over a year ago fueled bets of an end to the world’s last negative interest-rate regime.

--With assistance from Hideyuki Sano.

(Updates annual returns in second paragraph, adds market moves Friday in sixth.)

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