In January, the Nikkei average fell by 0.8% to 39,572.49 yen, while the TOPIX saw a modest increase of 0.1% to 2,788.66 points. The month started weak due to yen appreciation and concerns over U.S. trade policies, but optimism surrounding AI investments surged after President Trump's inauguration, despite worries about DeepSeek.
Concerns over potential impact of Trump’s trade policies and rising long-term interest rates applied downward pressure. The BOJ raised interest rates by 25 basis points, and concerns about DeepSeek impacted electric wire and Semiconductor Production Equipment (SPE)-related stocks.
Our positive long-term outlook for Japanese stocks is supported by a shift to a growth-oriented economy and management transformations. Earnings announcements for Q3 FY2024 indicate higher profitability trends for TOPIX constituents, with sectors like Banks and Real Estate showing strong earnings growth.
Key catalysts for share price momentum include wage growth continuity and increased corporate actions as the fiscal year ends. The Japan-U.S. summit on February 7 was perceived positively.
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Written by Kazuhiko Hosaka, Senior Product Specialist, Asset Management One Co., Ltd.