Is there any mileage left in the Japanese market?

Stocks2013 was a very good year to be invested in the Japanese equity market, as the Nikkei225 outperformed the MSCI AC World Index (MSCI).

However, so far in 2014 the story has not been so rosy, as the Nikkei has under performed the MSCI.

The earlier euphoria was mainly as a result of the election of Prime Minister Abe and subsequently the measures his government put in place to stimulate the Japanese economy. Not only this, but they were also putting in place measures to address the nearly ten years of economic deflation in the economy.

These so-called ‘Abenomics’ resulted in the Japanese economy growing to an annualised 6.7% in Q1 2014 and the rate of inflation to rise above its previous deflationary levels to 1%, and continuing to edge towards the government’s target of 2%.

These fiscal and monetary ‘Abenomics’ also resulted in the Japanese Yen devaluing significantly, which in turn, for a sterling-based investor presented exchange risk problems.

So where now?

The Japanese Government’s Pension Investment fund, one of the largest such funds in the world, has stated that it will be increasing its exposure to both overseas and domestic equities and real estate investment trusts in the short-term, so the Japanese market at its current level may appear to be attractively priced. Another consideration is the fact that the Japanese equity market historically has a low correlation to other major equity markets, such as those in the UK and the USA, so for those looking for wider diversification in their portfolios it could be attractive.

Should you wish to discuss any of the opportunities discussed here in greater detail, please feel free to contact us.

Professional advice is essential

When it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do, contact Robert Bruce Associates for individual assistance.