The Japanese equities showed a weaker performance as economic fundamentals continue to weigh down on the market. The Nikkei 225 Index lost 2.59% (-0.76% in US$ terms) and the TOPIX Index shed 4.02% (-2.22% in US$ terms) over the month of July.
The covid epidemic in Japan remains relatively uncontained, with confirmed cases finally present in every single prefecture. Virus hotspots in various metropolitan areas contributed to the sustained transmission in the country, Tokyo and Osaka reported record infection figures over the month. Despite the virus seemingly having a comeback, the Abe-led government saw no need for reinstating the nationwide state of emergency, only reemphasizing the importance of social distancing and taking care of the groups at risk.
Although global vaccine efforts seem to have yielded positive results, it is still questionable if there will be sufficient vaccinations by summer 2021, casting doubt over whether the delayed Olympics could still be held as scheduled. The tourism and airline industry are also expected to suffer lasting damage from the epidemic as the human behaviour changes permanently. Together these negative factors put a further dent to the struggling economy, weakened growth prospects makes the Japanese market a less attractive investment.