On March 4th, the Nikkei 225 index opened above the 40000 point mark, marking the first time in history. As of press release, the Nikkei 225 index rose 0.93% to temporarily close at 40282.28 points.
The Bank of Japan may end its negative interest rate policy in April
According to sources citing Kyodo News, the Japanese government is currently discussing officially announcing that the economy has overcome deflation, marking a significant shift after nearly 20 years of fighting against falling prices.
According to a previous report by Xinhua News Agency, data released by the Japanese Ministry of General Affairs on the 27th showed that in January of this year, Japan's core consumer price index (CPI) after removing fresh food was 106.4, a year-on-year increase of 2%. This is the smallest increase in the index since March 2022. Data shows that prices of foods such as egg milk, cooked curry, and fried chicken have significantly increased, driving food prices up 5.7% year-on-year in January; With the gradual recovery of the tourism industry, accommodation expenses for the month increased by 26.9% year-on-year; Affected by subsidies for electricity and gas bills, electricity bills for the month decreased by 21.0% year-on-year, while gas bills decreased by 22.8% year-on-year. At this point, Japan's core CPI has been rising year-on-year for 29 consecutive months.
As the Japanese stock market rises, the Bank of Japan's interest rate hike has become the most likely bearish factor. Recently, there have been strong signals from Bank of Japan officials to raise interest rates, and most economists predict that the Bank of Japan may end its negative interest rate policy in April.
How to view the current Japanese stock market?
Galaxy Securities believes that the upward trend of the Japanese stock market is influenced by both economic and financial factors, but these powerful factors may face a reversal in 2024. The Japanese stock market is facing difficulties in a significant upward trend once again, while the rise of the Nikkei ETF on the exchange in China is too large, and investors will face four pressures of liquidity, exchange rate, economic fundamentals, and monetary policy. In the future, caution still needs to be maintained towards the Japanese stock market.
CICC previously stated that the Nikkei Index in February 2024 and December 1989 were both at a level of over 38000 points, but there were many differences between the two. Firstly, there is a difference in valuation. At the end of 1989, the PE of the Japanese stock market (East Composite Index) was about 60 times and PB was about 5 times, which was much higher than the valuations of the US and European stocks at that time; In February 2024, the PE of the Japanese stock market (Dongzheng Index) was about 17 times and the PB was about 1.3 times, indicating a relatively reasonable valuation level. At the same time, it was lower than the level of Japanese stocks during the 1970-1985 period, indicating that the overvalued components in the current Japanese stock market are relatively limited.