The Nikkei and Topix have significantly performed in the Asia Pacific stocks, with gains of over 10% so far this year being their best annual performance in more than a decade. The Japanese stock markets have been supported by the solid third-quarter corporate earnings of Japan Inc, further strengthening the forecast for year-end increases for both the Nikkei 225 and Topix. Additionally, a weaker yen against the dollar, foreign investment in Japanese equities, and a push for corporate governance reforms have contributed to the market rally.
Moreover, Japan’s listed companies are expected to achieve record high net profits for the third consecutive year, with recent gains in the stock market linked to a weakening Japanese yen. Despite the positive performance of Japanese exporters, the weakening yen has negatively impacted the purchasing power of consumers in Japan, leading to uncertainty around the country’s economic growth. Market participants expect the Bank of Japan to move away from its negative rates regime at its April policy meeting, subject to annual spring wage negotiations confirming a trend of meaningful wage increases and consequently encouraging consumer spending. Prolonged high inflation rates have also negatively affected domestic consumption and contributed to Japan’s decline as the world’s third-largest economy, ceding its place to Germany.
