Change in sentiment for small caps

ON JAPAN

In recent months, stock price movements in Japan have been driven by excessive market expectations, disappointments with the recent government decisions, and by short-term events.

This has led to an increased gap occurring between the current price and the true value of Japanese equities. The expectation for the government’s ‘Abenomics’ growth strategy and the active contribution by individual investors together with the deregulation of the use of collateral in margin transactions, drove the Japanese market to its high in May. Despite the anticipation, the majority of the market did not respond well to the Abenomics strategy and the market took a hit, declining sharply by 20%. This decline was not necessarily a signal of the market’s disappointment at the gr...