Japan's stock market is leaving others in the dust this year

Japanese stocks are leaving other major markets in the dust this year.

Why it matters: This isn't just a markets story.

The latest: The Nikkei has notched a 14% gain so far this quarter, clambering to its highest closing level in nearly 33 years on Tuesday. The Japanese benchmark is up 22% this year, trouncing the performance of other large markets.

What's happening: Japanese stocks are getting a boost from a few separate but related shifts, that add up to a transformative moment for the world's third-largest economy.

1.) After the better part of four decades, Japan has inflation again.

2.) With that profitability, policymakers see a chance to push through long-sought reforms to the country's sleepy corporate giants.

3.) The market's rise also mirrors growing tension between the U.S. and China — respectively, Japan's most important ally, and its massive neighbor — especially after Russia's invasion of Ukraine returned the issue of territorial conquest to the global stage.

4.) Foreign investors are also starting to pile in, analysts say. Notably, this includes Warren Buffett, whose Berkshire Hathaway has boosted its key Japanese holdings recently.

Yes, but: Japan has had prior rallies that caught the market's attention — only to peter out.

The bottom line: But if the shifts in the global economy — including the return of inflation and growing tensions with China — and its own corporate sector prove durable, then Japan's next decade could look very different from its last.