Japan – Dragged down by the epidemic | Harris Fraser
Research Insights
17 February, 2020
Japan – Dragged down by the epidemic

Japan equities went a similar trajectory as most Asian stocks and dipped at the end of January despite the bull run earlier in the month, the Nikkei 225 Index and the TOPIX Index fell 1.91% (1.48% in US$ terms) ​​and 2.14% (1.72% in US$ terms) respectively.

The biggest concern at the moment is the extent of damage caused by the COVID-19 outbreak, as the Japanese economy is relatively exposed to China, markets are concerned if the economy will take a hard blow as Chinese consumption falls, threatening economy revitalisation plans in Japan. With confirmed locally transmitted cases reported in Japan mainland, the outbreak also clouds Olympic prospects, as a more widespread impact could dissuade visitors, or even cause the event to be cancelled in extreme circumstances, potentially damaging the Japanese economy.

Yet, we stay positive on the economic outlook of Japan in 2020. Although the latest economic figures continue to show slight weakness, in particular soft PMI figures, which might be compounded with the ongoing virus outbreak. Yet, the key fiscal stimulation plan of Prime Minister Shinzo Abe should still provide much support to the Japanese economy, supporting the equity markets performance.

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