Japan equity: top performer in 2023; remains attractive option for 2024

Tuesday 13 February 2024

Cross Asset

   

Japan equity: top performer in 2023; remains attractive option for 2024

February 2024 | Three key arguments support the Japanese market: (1) A recovery in profits (2) A strong incentive from the Tokyo Stock Exchange for companies to improve their capital efficiency and (3) The shift out of deflation is boosting a market rerating. The risks to these positive arguments are mostly linked to the yen. A strong comeback by the yen, should global equity volatility increase sufficiently in 2024 to encourage the unwinding of carry trades, would weigh on the performance of Japan's equities in local currency It would penalize profits and, everything else being equal, slow the process of increasing inflation, weighing on valuations at the same time.

01 |  Japan's equity market is at a historical high in total return terms; in price return terms it is at its highest level in almost 34 years.

02 | The "easier part" of the disinflationary process is past, and the path to bringing core inflation back to target will require a substantial moderation in demand and growth.

03 | The reforms introduced by the Tokyo Stock Exchange in March 2023 should continue to produce positive effects in 2024.

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Unless otherwise stated, all information contained in this document is from Amundi Asset Management as of February 12, 2024 . Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the [author] and not necessarily Amundi Asset Management and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product or service. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not indicative of future results. Amundi US is the US business of Amundi Asset Management.

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