Unigestion's Mollin-Elliott: What will drive the Japanese equity market over the next 12 months?

Fiscal stimulus and central bank intervention possibilities

Japanese equity market drivers for the next 12 months include fiscal stimulus, Bank of Japan (BoJ) intervention, the impact of Covid-19 and EPS revisions.

Fiscal stimulus should be supportive of a sharp economic rebound: Japanese government announced its second supplementary budget on 27 May with fiscal spending of ¥31.9trn (5.9% of GDP). The main focus of this budget is to support companies and avert bankruptcies and lay-offs. Japan's economy should now be well supported and be in a strong position to rebound from the Covid-19 impact. Recent data is pointing to a rosier economic outlook as on 8 June, Japan Real GDP for Jan-Mar was -2.2% QoQ (annualised) vs. -3.4% reported preliminarily. BoJ intervention provides a floor to the Topix...