Today is the last trading day of January 2024, Nikkei 225** is 061% closed at 3628671。This month's Nikkei 225 accumulated **78%。This is a continuation of last year's 28%. The Nikkei 225 is now one step away from its 1989 high.
There are both micro and macro factors that drive Japan to continue to grow, both at the corporate level. Below I will summarize the 8 main reasons for promoting Japan's ***.
1.*Dividends are growing
According to the Nihon Keizai Shimbun, the dividends of Japanese listed companies in the fiscal year from April 2023 to March 2024 will reach 16 trillion, about 3% of Japan's GDP, a record high.
2.*Buybacks continue to increase
In addition to paying dividends, the repurchase of tradable shares by listed companies is also a way for listed companies to give back to shareholders. From April 2023 to March 2024, the amount of buyback** by Japanese listed companies is 96 trillion yen, or about 2% of Japan's GDP, is also a record high.
The reform measures of the Tokyo Stock Exchange in recent years have been an important reason for the increase in dividends and buybacks of Japanese listed companies. Japanese listed companies are accustomed to holding large amounts of cash; Many public companies also hold large holdings in other companies**. These business habits with Japanese characteristics have led to a low utilization rate of listed companies. Currently, about 50% of listed companies in Japan have a price-to-book (PBR) ratio below 1. In response to this phenomenon, the Tokyo ** Exchange has asked all companies with a price-to-book ratio of less than 1 to come up with measures to improve the utilization rate of funds, and to publish a list of these companies and their reform plans. The actions of the Tokyo Stock Exchange have not only increased the transparency of the operations of listed companies, but also forced companies to strive to improve the utilization rate of funds.
Increasing dividends and buybacks** are effective measures that can quickly increase the price-to-book ratio of companies in the short term. For example, Mitsubishi Corporation has spent 400 billion yen on buybacks** over the past two years and has continuously raised its dividends. As a result, Mitsubishi Trading's price-to-book ratio increased from 07 rises to the current 11。
3.Accommodative monetary policy
Economics, which has been implemented since 2013, has been the main driving force behind Japan's more than 20-year bear market. Former Bank of Japan Governor Kuroda is the first hand to implement the first arrow of economics: quantitative easing monetary policy. In April last year, the Bank of Japan welcomed a new governor, Ueda. At the time, many analysts believed that Ueda would abandon the monetary policy of quantitative easing. However, the Bank of Japan, under Ueda's leadership, did not make a sharp turn on Japan's monetary policy. Ueda has repeatedly stated that the premise for exiting QE is that Japan achieves a sustainable inflation target driven by wages**. Thanks to the central bank's intervention, the interest rate on Japan's 10-year government bonds is still below 07%, leaving Japan in an accommodative monetary environment with near-zero interest rates.
4.Depreciating yen
In January 2023, 1 dollar can be exchanged for 130 yen, and today 1 dollar can be exchanged for 147 yen. The yen has depreciated by about 13% against the dollar. Japan's GDP in dollar terms has shrunk further due to the depreciation of the yen, and Japan has slipped from the third largest economy in the world to the fourth place, overtaken by Germany. However, the majority of companies listed on the Tokyo** Stock Exchange derive their main revenue from overseas markets, rather than from the domestic Japanese market. For example, 80% of the revenue of Takeda Pharmaceutical, Japan's largest pharmaceutical company, comes from sales in overseas markets. The depreciation of the yen means that the profits of Japanese listed companies in yen terms have increased. It is estimated that for every yen depreciated against the dollar, the profits of all listed companies in Japan increased by 198 billion yen.
5.Japanese wages continue**
In 2023, Japan's nominal wages will average 36%。This year's "spring fight" to demand wage increases has begun, and many unions have set a target of 5%. Japanese Prime Minister Kishida also said that wages must be over-inflationary. Some of Japan's largest companies have taken the initiative to show a significant increase in wages. Suntory, a well-known Japanese whisky manufacturer, has announced a 7% wage increase; In order to compete for talent, Nomura, Japan's largest brokerage, plans to raise the salary of new employees by 16%.
6.The adjustment of the global ** chain has brought opportunities to Japan
Strengthening the security and resilience of the ** chain has become the consensus of Europe, the United States and Japan. Japan is an important partner of the United States in reconstructing the global semiconductor chain. The U.S.'s "friendly shore outsourcing" strategy has made Japan a hot spot for the development of the global semiconductor manufacturing industry. TSMC's first factory (28-12nm) in Kumamoto Prefecture, Japan, began mass production this year; TSMC has already started applying for land for a second chip manufacturing plant (6nm) in Kumamoto; TSMC's third chip factory (2nm) in Japan is being planned. Semiconductor equipment and materials companies in Japan are also expanding their investments. Japan** has set aside 2 trillion yen to support domestic and foreign semiconductor companies to invest in Japan.
7.The NISA tax-exempt investment account is made permanent
In order to promote the multiplication of household wealth in Japan, Kishida** has made the tax-free investment account NISA permanent from this year, and the investment limit of the account has also been increased from 1.2 million yen to 2.4 million yen per year. Currently, the financial assets of Japanese households are about 2,100 trillion yen. More than 50% of these assets are lying on bank accounts with zero interest rates. If the Japanese run out of money in their NISA accounts this year, 165 trillion yen will go into Japan**.
8.Overseas funds poured into Japan
Under the leadership of Warren Buffett, overseas funds continue to pour into Japan. Warren Buffett's holdings of the five major trading companies have reached 8 of the current circulation of these companies5%。In November last year, Warren Buffett won another 11% interest financing of 120 billion yen is ready to continue to increase the position of these five major trading companies to reach 99% target. It is estimated that Warren Buffett's investment in Japan has doubled. Japan's growth rate of 28% last year made overseas ** who have no or low allocation to Japan anxious to catch the train of Japan. From January 15 to 19 this year, the net volume of overseas funds in Japan was 384 billion yen. Chinese investors who are eager to invest in Japan** have hit the premium rate of Nikkei ETFs issued by domestic ** companies to 20%.