2Q18 CIO Insights: In need of catalysts


The Japan economy grew for the eighth consecutive quarter, but its recent quarter’s growth fell short of consensus expectations
Chief Investment Office12 Apr 2018
Photo credit: AFP Photo




Japan equities have generally underperformed global equities (local-currency terms) in recent months as global indices sold off in early February. The strengthening of the yen, by about 4% against the dollar since the start of year to mid-February, partially explains this underperformance. Valuations are now more reasonable. Earnings are still on track but earnings beats are no longer as high as before. Japan’s economy grew for the eighth consecutive quarter, albeit at a slower-than-expected pace. The labour market remains tight while domestic growth is still supportive. That said, low inflation remains a perpetual concern for the Bank of Japan (BOJ). We maintain our Neutral view on Japan equities.

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