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Still upside for Japanese equities, says BofA
Japan's equity market could, however, face risks should a US recession prompt a substantial yen appreciation or should Bank of Japan (BoJ) normalize its monetary policy prematurely, an analyst says.
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People pass by an electronic board displaying Tokyo Stock Exchange data along a street in Tokyo on March 8, 2023. (AFP/Richard A. Brooks )
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apan's stock market has surged to its highest level in more than three decades, with Tokyo Stock Exchange’s Topix index up 22 percent since the beginning of the year.
It outperformed major global indexes, such as the S&P 500 and the SSE Composite, which increased 15 and 3 percent over the same period, respectively. Meanwhile, London Stock Exchange's FTSE 100 and Hong Kong Stock Exchange's Hang Seng index are lower than where they started the year.
Nevertheless, Masashi Akutsu, Japan equity strategist at Bank of America (BofA) Global Research, opined that there was still an upside for Topix's price-to-earnings ratio.
"Further, we expect an upward revision in consensus earnings per share (EPS), thanks to the yen depreciation and domestic economic recovery," Akutsu told The Jakarta Post on June 17.
According to him, there has been little incentive for companies to radically change their behavior over the last two decades, but that was changing. The shift in inflation rates should prompt corporates to raise prices and gradually increase overall profitability, he said.
Read also: Japan economic growth beats expectations in first quarter
Akutsu pointed out that special-purpose entities (SPEs), factory automation and electronic components were core drivers of Japan’s global competitiveness.
