According to the "Japan Economic News" on March 5, on the 4th, the Nikkei Stock Average stood above the 40,000-point mark for the first time, and Japan** also became one of the most eye-catching in the world this year with a 20% increase. Compared with other countries, Japan has a strong local currency, low interest rates, deflationary and other favorable conditions. In addition, the improvement level of expected earnings of enterprises is higher than that of Europe and the United States, which has driven overseas funds to enter the market.
On the 4th, the Nikkei Stock Average in Tokyo continued**, hitting another record high. On the same day, ** closed at 4010923 o'clock, compared to the last trading day of last week **19841 points, an increase of 05%。The Nikkei has risen 20% so far this year, second only to Turkey's stock index (22%) in the G20.
The momentum of overseas investors has accelerated again since January, and the net amount has exceeded 2 so far this year6 trillion yen (about 17 billion U.S. dollars). The mainstream view, represented by Shuji Yoshioka, full-time executive director of SMBC Nikko**, is that global investors still hold too little in Japan**, and more foreign capital will enter the market in the future. The main reason why Japan** has attracted the attention of overseas capital is that the performance of Japanese companies has a higher level of improvement compared to Europe and the United States.
The net profit per share of companies that make up the Topix Index will increase by about 4% in 2024 compared to the end of 2022, raising expectations that a weaker yen and higher corporate values will lead to improved earnings.
In contrast, the expected earnings of major companies in Europe and the United States fell by 4% to 5% over the same period. With the exception of U.S. tech giants, interest costs on loans have weighed down companies, leading to sluggish growth.
Inflation since the pandemic has had a negative impact on the global economy, but it has played a positive role in Japan's efforts to overcome deflation. Japanese companies, which were previously hesitant to pass on costs, are now improving their products**, which overseas investors see as a positive change.
Prices** pushed Japan's nominal gross domestic product (GDP) to 591 trillion yen in 2023, up 6% from the previous year and approaching the 600 trillion yen mark. In the past, changes in the Nikkei Stock Average have been highly correlated with nominal GDP.
The factors that initially drove the depreciation of the yen in the market will disappear this year. But it will take time for the US to pivot to rate cuts. The Bank of Japan made it clear that it will continue quantitative easing after ending its negative interest rate policy, which also contributed to the renewed strength of the bullish tone on Japan**.
Jean Boisin, director of the Investment Research Institute at BlackRock, a major US asset manager, remains bullish on Japan**, saying: "The weaker yen has not only boosted companies' overseas performance, but prices** have also made it easier for companies to raise prices." "The Nikkei Stock Average in dollar terms is still 8% below its 2021 high, and some argue that now is a good time to use the dollar**.
Japanese Prime Minister Fumio Kishida said on the 4th: "I strongly feel that market participants have given positive comments on the pace of Japan's economic reform. ”
However, if the yen begins to appreciate, Japan's dominant position will also be shaken. Mizuho** estimates show that a 10% yen appreciation would lead to a 2 trillion yen decline in the overall operating profit of Japanese companies. Shunsuke Kobayashi, chief economist at Mizuho**, pointed out: "Under the condition that 1 dollar is exchanged for 130 yen, it will be difficult to guarantee profit growth. ”