Japanese equities had a strong month with the Nikkei 225 breaking through 20,000 towards the end of the month at 20,033, rising 2.14% over the course of the month. The Topix also had a strong month rising 1.62%. There are positive signs in the Japanese economy, with wages growing, but this has not yet caused an uptick in inflation required by the economy. Prices increased for the fifth straight month but remain a long way below the Bank of Japan’s (BOJ) target of 2%.
Corporate governance reforms and more shareholder friendly behaviour by companies has led us to go overweight in Japan. This is coupled with earnings upgrades and a stable yen which is providing a strong economic outlook. Exports and industrial production have both expanded, and unemployment is sitting at 2.8%. The BOJ kept interest rates on hold as it improved its view on the economy. Huruhiko Kuroda, BOJ Governor, is keen to keep monetary stimulus in place until the inflation target has been reached. All in all things are looking up for Japan, after a long period of change.
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