While the covid-19 situation in Japan did not significantly worsen when compared to other countries, number of cases steadily rose, market sentiment worsened accordingly and equity indexes fell. The Nikkei 225 Index and the TOPIX Index were down by 10.53% (10.21% in US$ terms) and 7.14% (6.81% in US$ terms) in March.
Amidst the terrible news in the month, the ray of hope came from the International Olympic Committee’s (IOC) decision, as the Committee reached an agreement with the Japanese government, deciding not to cancel the 2020 Tokyo Olympics, but rather postpone it for a year. Affected sectors had a formidable rebound as they have avoided the worst-case scenario of a complete cancellation.
However, epidemic affected sectors like tourism and consumer goods are not expected to fully recover from the virus impact, all the investment in anticipation of the Olympics will likely not be recovered within this year. This is further worsened by the widespread virus impact, likely leading to an expected global recession. As the positive factors dissipate, although there is still downside protection, with the Bank of Japan continued its direct support of the market via ETF purchases, we remain neutral on the Japanese market in 2020.