Weak yen fuels Japan’s 2023 equity rally during foreign demand

BLOOMBERG

One of the world’s biggest share market rallies this year in Japan may be extended if foreign investors become even more bullish in 2024. The Topix index and the Nikkei 225 Stock Average both touched 33-year highs and rose more than 20% so far for 2023, beating most equity benchmarks in the rest of Asia.
Gauges that track Japanese automakers and electronics companies surged at least 33% as the yen depreciated against all major currencies. That was fuelled by signs that the Bank of Japan isn’t in a hurry to alter its ultra-loose monetary policy.
Even with the yen’s rally since early November, Japanese stocks may stay solid given that the currency remains relatively cheap and corporate earnings have become less susceptible to foreign exchange fluctuations. Overseas investors have also cheered Japan’s push to increase companies’ shareholder value. “Investors outside of Asia, such as those in the US, Europe, and the Middle East, are also interested in Japanese equities,” said Masashi Akutsu, chief equity strategist at BofA Securities in Tokyo. “If they are really convinced that Japan will improve, they will raise their rating, and then funds will come in line with the fundamentals.” Foreign investors were net sellers for only three months this year as of November, according to data calculated by the Tokyo Stock
Exchange.
Other sector winners included trading companies that climbed after billionaire Warren Buffett increased his stake in the sector’s largest firms. Among the Topix’s 33 sub-indexes, pharmaceutical companies were the only group to decline this year after a series of clinical trials faced setbacks.