Japan’s equities surfing on the end of deflation

“Japanese equities may further benefit from the major transformations in the country’s economy and markets.”

  • The Bank of Japan has paved the way for an exit from its Negative Interest Rates Policy (NIRP) in Q1 2024.
  • Japan’s exit from deflation is transforming the behaviour of corporations and households.
  • These changes, combined with recent reforms should continue to support Japanese equities, after their strong 2023 rise.

As expected, the Bank of Japan kept major policies stable at its December meeting. However, it also projected a positive trend in wage growth and inflation, paving the way for a very probable end of its negative interest rate policy in Q1 2024.

More broadly, the exit from the long entrenched Japanese deflationary trend is bringing major changes in terms of behaviour of Japanese corporations (towards more investment) and households (towards directing savings to more risky assets). Moreover, the Tokyo Stock Exchange has been conducting a major reform aimed at improving corporate governance.

You can now read the full whitepaper at the link below