Japan stock market needs buy-in by domestic institutions, investors
Cheap yen and negative interest rates have been a big driver of the country’s equities performance, but these conditions are set to reverse this year
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THE Bank of Japan (BOJ) raised its interest rates for the first time in 17 years, ending its negative-interest-rate policy, about two weeks ago. It noted then that an upward cycle for wages and growth will likely be conducive to sustained inflation over the longer term.
Indeed, the latest Shunto wage negotiations yielded a pay increase of 5.28 per cent, a significant breakthrough in Japan, where real wages have stagnated for more than 30 years. This is a historic inflection point in Japan, with hopes that higher wages will lift consumer spending and prices in a sustainable manner.
More importantly, this symbolic acknowledgement by BOJ that deflation is finally defeated could persuade Japanese corporates to increase capital expenditure, driven by both higher consumer spending and an ultra-competitive Japanese yen.
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