Jupiter's Somerville: Abe must fire his third arrow

ON JAPAN

Japanese prime minister Shinzo Abe must unveil a comprehensive set of structural reforms if Japan's equity rally is to continue, according to Jupiter's Simon Somerville.

After rallying strongly for six months from mid-November, Japanese equities have fallen sharply in the last two weeks. Weak Chinese manufacturing data and Ben Bernanke’s recent speech may have started the decline but what is clear is that investors became easily spooked after the market had risen so fast. Nonetheless, the potential for Japanese equities persists, in our view, especially if reform progresses. In recent months, Japanese exporters led sustained rallies in the equity market as a weaker yen led to expectations of strong profit recovery following a protracted period of pain...