In this CIO Viewpoint Equity – Japan: Structural reforms to drive rerating, but range-bound in the near-term – we evaluate the recent macroeconomic developments, central bank stance and progress on corporate reforms. We also highlight how fundamental rerating is driving the long-term positive outlook, but that short-term prospects are clouded by uncertainties.
Key takeaways:
- The BoJ is likely to remain in “wait and watch” mode amid mixed macro signals and the Fed starting its easing cycle.
- Given the government’s recent response to events and the replacement of prime minister Fumio Kishida being underway, the preference may be for stability, not risking a replay of recent volatility.
- Ongoing corporate reforms continue to drive positive rerating for Japanese equites despite JPY pressure.
- However, the short-term outlook for equities may be more of a stable sideways movement rather than continuing to post gains.
