The stocks in Japanese markets seem to be having a swell time at the start of the week. Asia, in general, has been having a mediocre performance, but Japan has been excelling. This recent bull run may actually be their best streak since 1990.
The Japanese Nikkei index managed to shoot up by 8% for this month. That is a 29% rise for the year up to the current date. Another index is Topix, which represents a broader category of Japanese stocks. This index showed 26% growth in the Japanese stock market. This is very positive for the stock market outlook for Japanese markets.
We should also note that the price-to-earnings ratio for this index is around 14. For comparison, in US indices like the Nasdaq and S&P 500, it’s 29 and 23 respectively. The Topix market capitalisation is equal to 454 trillion yen. However, analysts seem to believe that the companies on these indices trade well below their value. They tend to be beyond their market capitalisation, around 20% more, by looking at their internal cash reserves. According to analysis, they should be worth around 555 trillion yen. So, it seems there has been considerable undervaluation in markets for a while now. No doubt, we will see many trending stocks rising up in this market soon.
Consumer price data in Japan for the month of October should be coming out this Friday. Currently, the forecasts say it will be around 3%, well above the target of 2%.
Now, it seems as though inflation is starting to gather momentum in Japan, according to expectations. This may then result in households investing, injecting over 1,000 trillion yen into the stocks in the market. This could then finally bring up bond and equity prices.
Finally, wages seem to be rising in Japan and may be going up next year. This may finally result in the BoJ finally caving on its monetary policy and bringing up interest rates. The financial sector would see this as a huge benefit.
