Our view on Japan for August

The Nikkei 225 was up 1.4% and the broad Topix up 0.5% over August in Japanese yen terms, having experienced a turbulant month. Japanese stocks rose wiping out the losses seen earlier in the month after the Japanese yen decreased 1.2% against the US dollar, on the back of bets that the US Federal Reserve would not raise interest rates. Janet Yellen, Federal Reserve Chair, announced that the case for tighter monetary policy has strengthened, this caused a surge in selling of the yen. Subsequent to the announcement the Nikkei 225 was up 1.0% and the Topix up 1.3%. This was welcome news, Japanese stocks have been suffering following deminishing optimism over Prime Minister Shinzo Abe’s fresh stimulus late in July of ¥28 trillion to boost the economy.

Speculation over helicopter money continues to be rife in Japan, despite the Bank of Japan Governor Haruhiko Kuroda denying any plans to introduce such policy. There is a reluctance by analysts to rule out the unconventional policy amongst the continued struggle to create a path for future growth and inflation, many of them expecting a move in the coming month.

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