![]() While other central banks are hiking interest rates at record speeds, the Bank of Japan have gone against the grain and kept rates below zero. For the first time in decades, Japanese businesses are increasing prices and committing to upping wages. While global economies have been fighting soaring inflation, Japan has welcomed it following years of deflation. Progress is slow, but improvements have been made which could lead to companies being viewed more positively and attracting foreign investment.Īnother driver is Japan’s stance on inflation and interest rates. If the TSE feel a company is trading below book value, or in other words is undervalued, they need to present a plan on how to improve shareholder returns. This includes bettering their workforceand board diversity, transparency and accountability, but also a focus on shareholder returns. The Tokyo Stock Exchange (TSE) has undergone its largest overhaul in over a decade and committed to increase the standards of all listed Japanese companies. Fast forward to today and there’s been large-scale change. ![]() To combat this, the late Shinzo Abe, one of Japan’s most loved prime ministers, kickstarted a change in governance standards. Historically, Japanese companies haven’t upheld the same standards as in the western world. One of the most notable drivers is the corporate governance changes. Why is the Japanese stock market proving so popular with investors and where are the opportunities? All of which have seen Japan’s most well-known index surpass its previous high, set all the way back in 1990. Japanese stocks have also benefited from relatively ‘cheap’ valuations and a long-awaited return of inflation. Since the wobbles caused by the banking sector shocks in March, the Japanese stock market has bounced to near all-time highs. Japan has waited more than three decades for its moment in the sun, and many feel it’s on the cusp of a bull market. ![]() While it might not have benefited export companies as much as it once did, given some Japanese companies have shifted their production overseas, it’s still good news for a major exporting nation like Japan.Īnd then there’s the stock market. It’s helped boost the attractiveness of Japanese goods, making them relatively cheaper on the world market. This has stretched domestic income and pushed inflation higher.Ī weakening yen isn’t all bad news though. Given Japan import a lot of resources, particularly energy, a weak yen has made these transactions much more expensive. It’s fallen so sharply in fact, that some are questioning its status as a ‘safe haven’ currency. Over the last few years, the yen has fallen to historical lows. The Japanese yen could also add to this pressure. That’s largely because of the weaker than expected demand from China. While projections remain strong and upbeat, Japanese exports are likely to be sluggish this year. Moving forward, growth is expected to slow. Some businesses have rebounded quickly as a result. Following the removal of all pandemic measures, tourists have flocked back to Japan, which has boosted consumer spending. To put this into context, the US and UK’s GDP fell short of expectations, growing 1.1% and 0.2%, respectively.Ī large driver has been the surge in foreign visitors. The economy grew 2.7% in the first quarter of this year, beating earlier forecasts of 1.6%. Unlike many other countries around the world, Japan’s GDP, or gross domestic product, is beating expectations. All investments fall as well as rise in value, so you could get back less than you invest. If you're not sure if an investment is right for you, ask for financial advice. This has led to interest and excitement in Japanese companies being reignited, and begs the question, is this time round really different? Japanese markets have hit the headlines this year, reaching heights not seen since the 1990s. But things are starting to look at little different now. This has been largely the case since the 1990s. As a result, the phrase ‘false dawn’ became commonly linked to Japan, maybe unfairly at times, suggesting that signs of recovery or success are mostly short lived. It’s been a long and difficult journey for investors ever since, and while there have been glimmers of hope over time, they mostly failed to gain any traction. ![]() The impact of this period scarred many investors and left them wondering if they should ever invest in Japan again. Japan’s economic bubble burst in the late 1980s to early 1990s, resulting in recession and years of sluggish growth – a period now known as ‘The Lost Decade’. It became the envy of the world during the 1980s as its stock markets surged, exports boomed, and the property sector went from strength to strength.īut how the mighty have fallen. Once upon a time, Japan was the original Asian success story.
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