Can the rally in Japanese equities continue?

Sluggish growth and weak domestic spending

Japan has been the worst performing major stockmarket globally (in local currency terms) year-to-date. However, the third quarter saw the market rebound, led by cyclical stocks amid the Bank of Japan's "comprehensive review" of its stimulus policy. How likely is it that this rally will continue?

The three key elements of the latest monetary stimulus strategy shift emphasis from expanding money supply to directly controlling the shape of the yield curve. This includes pledges to cap 10-year government bond yields at 0%, to maintain a negative interest rate policy leading to a steepening of the yield curve, and to continue buying assets until inflation overshoots the 2% target. Kames' Peden boosts Japan exposure on global income fund This should be supportive of lending conditions - a positive for financial stocks.  Despite the recent cyclicals-led rally, the Japanese equ...