Japan – Sources of growth remains unseen | Harris Fraser
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21 November, 2020
Japan – Sources of growth remains unseen

Rocked by election uncertainties and economic weakness, Japanese equities faltered in October. The Nikkei 225 Index slightly fell by 0.90% (0.07% in US$ terms) and the TOPIX Index lost 2.84% (2.03% in US$ terms) over the month.

US elections posed as one of the largest focus in the investment market in October, as political direction uncertainties could possibly affect the growth prospects of the local market. With fundamental economic indicators staying on the weak end, including various PMIs staying in contraction zones, we find it difficult to build the case for a stronger outlook for the Japanese economy.

The newly formed Japanese government is still trying hard to find a way out for the local economy. As the ongoing covid epidemic continues its spread in the country, even though numerous policies are being considered, ranging from ease of foreign investments to insistence on holding the Olympics, we would keep our hopes for the economy low. While the Olympics could possibly help lift the limited growth, unless the global economy can fully recover to pre-covid levels in the short term, which requires fully functional covid vaccines and a well-executed deployment, we would rather remain cautious and refrain from overweighting on Japanese equities.

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