The country posted GDP growth of 0.9% in the first quarter of the year, an actualised growth rate of 3.5%. This is the highest growth rate of all G7 nations in the period, suggesting prime minister Shinzo Abe’s deflationary tactics, dubbed “Abenomics”, are working.
Yen is at a four-and-a-half year low versus the US dollar, its declining value over the past six months is shown in the graph.
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Japanese equities are at a five-year high as the aggressive monetary policy promised to voters in Abe’s election campaign has come into fruition. A government stimulus package worth 10.3trn yen was launched in January, while the Bank of Japan embarked on an extensive bond buying programme which fuelled the equities market rally.
Find out the five funds investors are buying to benefit from this uptick.
While two of the three Abe “arrows” have been fired already, less progress has been made on the third: structural reform.
Simon Somerville, manager of the Jupiter Japan Income Fund, said: “The tumbling yen may be reviving hopes of an export-led recovery for Japan but any sustainable improvement in the economy can only come from long-term structural reform.
“Specific policies have yet to be announced but the key areas of focus are likely to be increased labour market flexibility, greater female and senior labour participation, trade liberalisation through membership of the Trans-Pacific Partnership and the creation of ‘national champions’ through the relaxation of competition laws.
“If these structural reforms are even partially successful, it is not only individual companies that will profit but the entire domestic economy.”
