Between 2006 and 2012, Japan had no less than seven prime ministers; more than one a year. November’s landslide election of Shinzo Abe for a record-breaking third term signals a decisive end to an era of political instability and bodes well for a reinvigorated economy.
Immediately after Abe’s recent victory , the Nikkei 225 hit a 21-year high, building on a run that saw Japanese equities comfortably outperform European and US stock markets since the start of September.
On the macroeconomic front, too, the picture looks rosy. Corporate profits and business sentiment are up. GDP has risen for seven quarters in a row, its longest spell of interrupted growth for 16 years. Nominal GDP was almost 11% higher in the third quarter of 2017 than it was five years earlier. We see this spurt of growth as a major milestone. For the first time since 1997, nominal GDP is now above ¥533 trillion, meaning the economy has finally recovered the ground lost over two long decades of stagnation.
If you step back and look at what the government promised on the economy and what it has actually achieved since it launched fiscal and monetary stimulus in 2013, it’s pretty impressive. We think it points the way to a positive outlook for investors.
Miyuki Kashima – head of Japanese equity investment, BNY Mellon Japan