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It's the age of the foreign equities ETF, with investors clamoring for shares of ex-U.S. offerings. That rush for international equities saw the category set records for inflows in January, with the overall space off to a strong start in the new year.
As the global private equity industry took tentative steps toward recovery in 2024, Japan raced ahead. The value of private equity investment in Japan jumped nearly 41% over the prior-year total in 2024, far outpacing the 25% year-over-year gain in global private equity deal value, according to S&P Global Market Intelligence data.
The “real” policy rate is massively negative, with the new policy rate of 0.25% far below Core CPI of 2.6%. When QT reaches about ¥3 trillion per month in 2026, it would represent a reduction of its JGB holdings of about 0.5% per month.
In March, the Bank of Japan abolished its 8-year-old negative interest rate policy, hiking rates for the first time in 17 years by raising its benchmark rate to 0-0.1%. To combat inflation while also avoiding an excessive surge in interest payments, the BOJ is considering passive quantitative tightening.
We'd rather downplay the weaker-than-expected manufacturing data and focus on a solid recovery in retail sales and a reacceleration in inflation, which will be welcomed by the Bank of Japan. Inflation has been quite choppy due to various government programmes and utility prices.
By end-April 2024, Japanese equities had outperformed the FTSE All-World index over 12 months and in the year to date. Japan has undertaken significant structural corporate reforms in recent years.
A weak yen is unlikely to end the positive momentum in Japanese equities. The drivers of the recent rally remain, so we stay overweight Japanese stocks.
Japan's equity benchmark, the Nikkei 225 Index, has been on a tear in 2024, eclipsing its previous high set back in 1989. As of early April, the index is hovering near 40,000. Solid economic growth, a revamp in the country's tax-free stock investment program and corporate governance reform have helped propel Japanese equities to record highs.