Many investors are still relatively enthusiastic about the prospects for Japanese equities. Gavin Haynes, investment director, Whitechurch Securities, says: “Although recent economic data has been mixed, we do believe that the backdrop for investing in Japan is favourable and that the market will be supported by a continued economic recovery which will be boosted by further QE should it begin to falter in 2016
Redwood says: “The share market is not expensive, and does have the benefit of good profits and cash flow from many Japanese companies. It should get over this latest disappointment. The authorities are blaming the fall in the oil price for the shortfall on inflation, a change that also helps the profitability of some large Japanese companies.”
Nevertheless, there are some for whom a bear-ish position on Japan is entrenched. Justin Oliver, deputy chief investment officer at Canaccord Genuity, has a zero weight to Japan across his portfolios. He says that the economic case is just too weak.
Perhaps the Bank of Japan’s reluctance to undertake more quantitative easing could be interpreted positively. The Nikkei rose on the news, so someone believes that it may be good news for Japanese companies. If Japanese policymakers had a better track record, it might have been seen a sign that Japan is finally on the path to recovery.
