On the other hand, if the economy stumbles, despite the third arrow, the Bank of Japan may be forced to act and step up quantitative easing, which would also support Japan’s market.
Additionally, Japanese stocks look cheap relative to U.S. markets, with EWJ showing a price-to-earnings ratio of 13.59 and a price-to-book value of 1.07. In comparison, the S&P 500 index shows a P/E of 17.02 and a P/B of 2.33.
“The United States appears the most expensive of the major markets,” according to Russ Koesterich, chief investment strategist for BlackRock. “CAPE valuations are much closer to average for other equity markets. While none of the other markets, with the possible exception of Japan, are at a particularly cheap level.”
WisdomTree Japan Hedged Equity Fund
For more information on Japan, visit our Japan category.
Max Chen contributed to this article.