Where next for Japanese equities?

ON JAPAN

The Japanese equity market has had a good run in recent months. Although the first leg of the recovery, triggered by a weaker yen, is probably over, there is clear potential for Japanese equities to perform well over the longer term.

A second leg of the rally will be driven by strong company announcements resulting from the depreciated currency, as Japanese companies rebuild global market share against overseas competition. A third boost will be provided by improved returns to shareholders and more efficient balance sheet management. Many Japanese companies have built bullet-proof balance sheets as a result of the recessionary conditions they have endured over the past 20 years. With improving cashflow they are now easily able to provide good yields to investors, giving Japanese companies an advantage versus other gl...