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Tokyo investors are eyeing a rosy future, with a reconfigured pension fund investment, more central bank easing and a possible extra government budget to safeguard the fragile recovery, analysts say.
In the coming week, the Tokyo market will digest Japan's unemployment data and the key Tankan business confidence survey, as well as U.S. data on jobs, trade and manufacturing sector sentiment.
The dollar's sustained strength against the yen could also provide support for the Tokyo market.
"Japanese macroeconomic data as a whole should lift hopes for continued economic recovery and cheer the market," Daiwa Securities said in a report to clients.
On Friday, Tokyo stocks slipped 0.88% following a sell-off on Wall Street, easing from a seven-year high reached in the previous session.
The key Nikkei 225 index at the Tokyo Stock Exchange fell 144.28 points to 16,229.86. The index lost 0.55% over the four-day trading week, shortened by a national holiday on Tuesday.
The Topix index of all first-section shares eased Friday 1.08%, or 14.48 points, to 1,331.95. It made essentially no weekly change, edging up only 0.04 points.
"Japan is never immune to global equity sentiment which, at least for the moment, has taken an abrupt turn for the worse," said Naoki Fujiwara, fund manager at Shinkin Asset Management.
"The dollar remains relatively strong, however, and expectations for more government pension fund exposure to domestic equities are keeping hopes high for more stock buying," he told Dow Jones Newswires.
Daiwa Securities echoed the view and added that hopes for more easing by the Bank of Japan and a possible extra government budget to safeguard fragile recovery were also lifting the investor spirit.
Tokyo shares have generally enjoyed solid support from hopes that Japan's 112 trillion yen public pension reserve fund would increase its allocation to domestic stocks.
But investors are having to read tea leaves as the government for now moves cautiously to reform the Government Pension Investment Fund, which manages reserves for Japan's universal public pension and for private sector employees and invests in listed financial assets such as stocks and bonds.
© (c) 2014 AFP
3 Comments
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Michal Hrouda
Predicting future price of any financial product is inevitably fraught with error. Having said that, I am bullish on Japanese equities. As for me, it's definitely BUY.
kibousha
With BoJ continuously conjuring money to buy Nikkei 400 ETFs, and pension fund shifting to stocks, naturally stock prices just keep going higher and higher, creating the illusion that the economy is "great". I seriously doubt that the change resistant Japan Inc. has actually done or even plan something, other that money conjuration, great PR promises to boost its economic performance.
fxgai
I'll be surprised if the BOJ eases more in October as there seems to be expectations for... the yen has dropped to almost 110 yen from the 102-104 range in short order. I think the BOJ will wait for the effects of that to be seen before deciding to press down even harder on the monetary accelerator.
And the last thing the "fragile economy" needs is an extra government budget, which serves only to misallocate scare resources and add further debt to the pile. This is bad for the economy in the mid-to-long term, not good for it.