To be sure, the Japanese stock market is not without its risks. In the near term, many investors are expecting the BOJ to come to the rescue with additional monetary easing this summer given that inflation remains well below the central bank’s target. So, there’s the risk that the BOJ will maintain its current policy for longer than the market expects.
Even more importantly, over the longer term, the case for Japanese equities rests on structural reforms and improving corporate governance, changes that will take time. Still, given the many factors supporting Japanese equities, and especially a hedged position in the market, in 2014, I think Japan is an attractive bargain worth considering. In fact, other investors appear to be realizing this too. While Japanese stocks are certainly still down year-to-date, they are currently roughly 9% up from their April lows.
Sources: BlackRock, Bloomberg
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/ developing markets or in concentrations of single countries.