Revitalised Japanese stock market fuels investor optimism

HIGH-PROFILE endorsements of Japanese blue chips ignited optimism in Tokyo’s markets last year as the yen depreciated. An expected macro regime shift from deflation to inflation, robust corporate earnings and Japan’s corporate governance reform efforts, such as improved shareholder advocacy, are fuelling further optimism in 2024.

The bullishness comes despite Japan’s fall in world rankings – when Germany eclipsed it recently as the world’s third-largest economy – following a surprise technical recession in the third quarter of 2023. Prospects for wage growth also continue to underpin the country’s still-sluggish private consumption and capital spending.

Fortunately, however, economists anticipate Japan’s 2024 wage hikes to be higher than last year’s already-encouraging increase of 3.6 per cent – the highest in three decades.