At last, the sun rises on Japanese equities

Hobbled by decades of economic stagnation, Japanese stocks are poised for a turnaround.

TOKYO, Oct 21 (lordabbett.com) - The Japanese economy, after a prolonged period of stagnation, is currently experiencing a renaissance. A confluence of unique tailwinds in the current market environment suggests a supportive backdrop for future equity returns.

Japan's equity market is set to emerge from the "lost decades"—years of anemic GDP that marked a reversal of its strong and steady economic growth in the postwar years. Following twin bubbles in the equity and real estate markets in the 1980s, a subsequent crash led to banks facing challenges. At that time, the Bank of Japan decided to institute unconventional monetary policy, perceived at the time as a short-term solution, which aimed to keep short-term rates extremely low to spur business investment.

The short-term policy ran into a prolonged deflationary environment due to decreasing wages and an appreciation of the yen, along with swiftly accumulating government debt. This made it challenging for the Bank of Japan to raise rates, leading to over three decades of unconventional monetary policy.

But the tide appears to have turned in 2023. ...continue reading