Although the Japanese stock market experienced a sharp decline on Thursday due to the overnight impact of the US stock market, many investors still remain optimistic about the medium-term trend. BlackRock Inc., the world's largest asset management company, believes that in order to boost the Japanese stock market, the Bank of Japan may keep interest rates unchanged for a longer period of time. In the medium term, the company is highly optimistic about the Japanese stock market.
Yuichi Chiguchi, Chief Investment Strategist of BlackRock's Japanese subsidiary, stated that although investors should be wary of the risk of changes at any meeting of the Bank of Japan this year, the Bank of Japan may need to wait until the price trend becomes clear by the end of 2024 before taking action. This indicates that the TOPIX index may reach a new historical high this year.
We expect Japan's loose environment to continue, which provides favorable conditions for businesses and boosts the stock market while real interest rates remain negative, "he said in an interview.
Prior to the announcement of the latest policy decision by the Bank of Japan on July 31, investors in the Japanese stock market, bonds, and yen were all in a state of tension, with market expectations that the Bank of Japan would reduce its bond buying program. According to informed sources, although weak consumer spending has made the decision on whether to raise interest rates again at next week's interest rate meeting more complicated, people's focus is still on the issue of interest rates.
The BlackRock Investment Institute stated in its mid year outlook report that the recovery of the Japanese economy and rising inflation have made its stock market one of our most firmly optimistic markets.
This optimistic view has also been supported by Goldman Sachs, which recently raised its profit expectations for the CSI index. In addition, HSBC Holdings is increasing its holdings in Japanese stocks and expressing its optimism about the Japanese stock market.
This is in stark contrast to the views of Schroeder Investment Management. Last month, the company downgraded its rating on Japanese stocks to neutral, as the positive impact of a weaker yen on the stock market began to weaken, while rising import costs led to signs of deteriorating confidence among consumers and small businesses.
However, Chiguchi from BlackRock believes that there is still greater room for the Japanese stock market to rise, as the Bank of Japan may adopt a cautious attitude towards policy normalization. He further explained that the Bank of Japan will extend electricity and natural gas subsidies for a few more months, which will put downward pressure on prices and make it difficult for the central bank to measure inflation trends.
Nevertheless, he pointed out that the Bank of Japan may also take some action at each meeting. This month, the Bank of Japan met with bond market participants and formulated a plan to reduce bond purchases.
Finally, Chiguchi stated that companies in the technology industry are very attractive in Japanese stocks because they are in a favorable position to benefit from the expansion of artificial intelligence, an aging society, decarbonization efforts, and geopolitical situations. This strategist stated that this will include semiconductor related stocks.