Weekly Commentary - Investor sit on the fence about Japan reform
Over the past few months, investors view in Japan had shifted. Most investors agreed that Abe’s monetary and economic stimulus measures had initially gotten ahead, however they sit on the fence about the so-called “third arrow” of Abe’s corporate reform.
Driven by Abe’s first two “arrows” of aggressive easing and new public works-spending, the Nikkei 225 index rose 80% from November to May. Even though the index fell 20% in June, now it is up 15% from June low. In June, Mr. Abe unveiled measures of corporate reform to spur economic growth. However, the reforms will be debated in depth in early December. Economists believe such reforms, including corporate tax breaks and more labor market flexibility are keys to sustained growth.
Currently, our view in Japan is natural. Even though Nikkei 225 index rose 32% year to date, Nikkei may have more upside if corporate change is success.
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