Japan on road to recovery, suggests Deutsche Asset’s Lilian Haag

Lilian Haag, Japanese equities fund manager at Deutsche Asset & Wealth Management, says the most recent Bank of Japan monetary changes should support an already more benign environment for domestic companies.

Overall, it is clear that Japan is on the road to recovery and for one to two years should be in a healthy economic position. It is however important that economic programs and monetary policy include further reforms in the future. As such, the employment market must continue to deregulate and free trade agreements with the USA and Europe have to be put in place. Japan’s economy remains extremely focused on its home market – but it is especially important for many domestically oriented companies to stand up well against the competition. This could drive modernization that would support the country in achieving greater competitiveness.

If the Japanese currency remains at its previous level of 95 Yen, we assume that profits of Japanese companies in the fiscal year 2013 (April 2013 to March 2014) may grow by 40 to 50 per cent. Based on the historical PER figure of 18, the Japanese equity market (Topix, Nikkei) could increase by up to 20 per cent by the end of the fiscal year. (from current level of 1060 and 12800 points respectively).

 

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