If we would just consider the economic indicators, the Japanese economy still has much room for improvement. Although manufacturing PMI has managed to stay steady and expanding, riding on the recovering global economy, services PMI remained firmly in the contraction zone, which could have been a result of the continued epidemic situation in the Japan; household spending also missed expectations in July, heeding signs that the economy could see further slowdown in the second half of the year. 

However a surprise news did come out lately, as Prime Minister Yoshihide Suga recently announced that he will step down as the party leader. As Mr Suga’s approval rating tanked during his relatively short tenure, markets hoped a new prime minister could bring a breath of fresh air to the leadership. Together with a promising vaccination progress in the country, expectations of getting the pandemic under control could give the much needed boost to the stagnant economy, potentially driving the index higher and play catch-up to other developed markets. Although uncertainties do remain in the short term, a potential upwards drive based on lifted market sentiment is not to be ruled out.