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Time to bail out of Japanese equities?

Even though Japanese equities were the best performing asset class in 2015, fund selectors have retained an ambivalent attitude towards them. And with good reason, it has now turned out.


PA Europe

Perhaps the best counter argument to cashing out stems from the relative merits of other asset classes. If you do not put money into Japan at the moment, where do you put it?

There are hardly a wealth of options when it comes to equities markets expected to perform strongly in 2016.

Stephen Allen, senior investment manager at Architas had a relatively upbeat take on the situation, with his optimism tied to the prospects for more QE. He did however concede the nation can only go to the monetary stimulus well so many times.

“Despite the GDP announcement the stock market counterintuitively moved up strongly today making up for some of last week’s strong move down,” Allen said.  “Whether this was a reaction to Yen currency weakness, sharp moves up in the US and Europe on Friday, or on the basis perhaps that bad GDP news is good news for shares as it points to potentially more QE or other fiscal stimulus, remains to be seen but it was probably a combination of all these factors.  With the market fixated on this further easing and stimulus it is a concern that the Bank of Japan is perhaps running out of options.”

Chief economist and strategist at Schroders Keith Wade believes the poor GDP figure will increase pressure on the Bank of Japan to justify its policy and he questioned whether the QE programme has provided any real benefit. Wade also sounded a warning on China’s role in Japan’s fortunes.

“On balance, it is difficult to see any net financial stimulus from the BoJ’s action to date. Some relief can be taken from the decision by the People’s Bank of China to strengthen the Chinese yuan today, which followed Governor Zhou Xiaochaun’s comments at the weekend on China not seeking exchange rate depreciation,” he said.