After more than a decade of decline, Japanese stocks are finally staging a comeback. The Tokyo Stock Exchange's benchmark Nikkei index has shot up 23 percent since May, compared with a flat-lined Wall Street, and hit consecutive four-year highs in recent sessions, including Tuesday when it closed above 13,700 points for the first time since May 2001. The big question is whether the recovery's for real or false start like those of the 1990s. This time, analysts and investors say there important reasons to be optimistic. Japanese stocks lost about 80 percent of their value between late 1989 and 2003, as the world's second-largest economy struggled against weak corporate earnings, a burst real estate bubble, mountains of bad debt at the nation's banks and rising unemployment. But the Nikkei 225 index, which tracks Japan's most prominent companies, has been rallying since this summer. "This is fundamentally different from the temporary recoveries you saw in the 1990s," said Richard Jerram, chief economist at Macquarie Securities in Tokyo. "Those post-bubble problems have worked through the system." The most important contrast is Japan's improved economic health. Annual economic growth was recently upgraded to 3.3 percent from an earlier estimate of 1.1 percent. The banks' bad loans are behind them, and land prices are rising for the first time in 15 years. Unemployment dropped to 4.1 percent in June, its lowest since 1998, while rising wages have spurred consumer spending and upbeat companies have increased investment. Meanwhile, Prime Minister Junichiro Koizumi is fresh off a landslide election victory and promising to push ahead with sweeping financial reforms that could further invigorate the economy. He plans to start with privatizing Japan's postal savings and insurance system, which analysts say will free up some 330 trillion yen (US$3 trillion; euro2.45 trillion) for possible injection into the stock market. All that good news has sent stocks soaring as well as expectations. UBS Securities raised its target for Japanese stocks last week, predicting the Topix index, which includes all issues on the Tokyo exchange's first section, to hit 1,503 points in the fiscal year starting in April. Morgan Stanley said in a report Monday that the Topix is on course for 1,600, although it didn't give a time frame. The Topix has climbed about 22 percent this year and closed up 0.7 percent at 1,421.83 on Tuesday. The Nikkei added 213.56 points, or 1.58 percent, to 13,738.84, its highest finish since May 29, 2001. Merrill Lynch chief economist Jesper Koll said last month the Nikkei could rocket to 25,000 points by 2008, for an 80-percent gain, assuming Japanese corporate earnings per share grow 15 percent a year. Shares linked to the domestic economy, such as banks, real estate and retailers, have gained most in the recent rally. But exporting companies like auto and steel makers have risen on hopes they will benefit from the yen's 10 percent decline against the dollar this year. A weaker yen makes Japanese products cheaper overseas, boosting sales. Foreigners have been the biggest buyers as they recalibrate portfolios once slim on bedraggled Japanese shares.