Japan

30 Oct 2019

Japan has proved comparatively resilient to the colder winds of change blowing around the world in recent months, as economic growth has more than matched low expectations during the first half of the year and any downward revisions to GDP growth forecasts have been limited to minor adjustments and almost exclusively in 2020.

Download the View from the bridge PDF
Recent data from Q2 indicated that domestic demand more than offset any damage to export activity triggered by the global trade frictions and both consumer demand (in anticipation of the autumnal 2% rise in VAT rates) and business capital spending (potentially augmented by planning for the Rugby World Cup and next year’s Olympic Games) recorded improvements above consensus forecasts.  This enabled GDP to surprise on the upside and gave the authorities sufficient confidence to push ahead with the proposed rise in VAT, which had been postponed twice in recent years.
Corporate profits reflect the ongoing programme of business reform and shareholder friendly governance changes and these have helped to push consensus forecasts for growth in the next fiscal year above 5%.  
The authorities continue to adopt a loose monetary position and bond yields remained in negative territory with the 10yr yield ending September at a level of -0.23%.  Corporate profits reflect the ongoing programme of business reform and shareholder friendly governance changes and these have helped to push consensus forecasts for growth in the next fiscal year above 5%.  
 
Dividends are also on an upward path and yields on the broad equity market index are now approaching a level which is c3% higher than that on their Government bonds.  Such a premium has served to make Japan one of the best performers among stock markets during the past quarter, more so for international investors given the strength of the yen,  and the low rating and prospects for further increases in profits and dividends should keep the equity market well supported.

Download the Weekly Digest PDF
  • Disclaimer

    This newsletter is for information purposes only and we are not soliciting any action based upon it. Opinions expressed are our current opinions only and are subject to change without prior notifi cation. The material is based upon information we consider reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. All market and fi nancial information has been sourced from DataStream unless otherwise noted. Before taking any action based on the information provided you should consult your usual broker or fi nancial adviser. Target returns are not guaranteed. Past performance of an investment is no guide to its performance in the future. Investments or income from them can go down as well as up. You may not necessarily get back the amount you invested. Foreign currency denominated securities and fi nancial instruments are subject to fl uctuations in exchange rates that may have a positive or adverse effect on the value, price or income of such securities or fi nancial instruments.

     

    Member firm of the London Stock Exchange. Authorised and regulated by the Financial Conduct Authority. 

     

    Investec Wealth & Investment Limited is registered in England.

     

    Registered No. 2122340. Registered Office: 30 Gresham Street, London EC2V 7QN.