Japanese Stocks Surge to 33-Year High on Strong Earnings and China Stimulus
Japanese stocks, particularly the Nikkei, have continued their bullish streak, reaching highs not seen since 1990. The Nikkei is up over 8% this month and nearly 29% for the year. Despite this, the broader Topix index still trades at a relatively low price-to-earnings ratio of 14. Japanese companies hold significant internal reserves, with half of listed companies trading below book value and holding 20% more cash than their market cap. Recent earnings results have shown the benefits of a weak yen and the return of pricing power after years of deflation. Rising inflation expectations may prompt households to invest their cash holdings into equities and bonds. Additionally, there are speculations that the Bank of Japan may unwind its easy monetary policy and potentially turn rates positive, which could benefit financial sector stocks.