Not even an interest rate hike for the first time since 2007 has slowed the record-breaking surge in Japanese shares.
Signs that deflation has ended are driving investors to bet ever more on Japan’s economic growth, while a weakening yen continues to boost exporters like Toyota and Canon. Morgan Stanley has maintained its target for the broad Topix equity gauge to rise to 3,100 in its bullish scenario, just 10% away from Friday’s close.
In normal times, rate increases by central banks should hurt most shares as they tend to push up borrowing costs. But these aren’t ordinary days in Asia’s second-biggest economy, with the return of inflation prompting the Bank of Japan to abandon its arsenal of radical monetary easing steps including the world’s last negative-rates regime. An official push on companies to improve shareholder returns has attracted a slew of funds from overseas, while the 225-issue Nikkei stock average’s jump above 40,000 to all-time highs has led to Japanese individuals betting on more gains.