Japan still has not broken free from a deflationary mindset

The Japanese stockmarket had been sluggish and trading-orientated in the wake of the yen's recent appreciation, partly reflecting renewed jitters over the Trump risk when it came to the US presidential election, writes Hideo Shiozumi, manager of the Legg Mason Japan Equity fund.

But as it transpires, shares have soared since his surprise win, with both the Nikkei 225 and the Topix rising sharply. Domestically, the Bank of Japan remains supportive, having recently introduced a new policy framework dubbed 'QQE (quantitative and qualitative easing) with yield curve control', which should cap long-term interest rates. It also clarified that any additional easing will likely include deeper negative interest rates. This means that unless the yen appreciates further, Japanese corporate earnings should begin to improve from Q1 2017, but the stockmarket might see a tu...