Last week, the Bank of Japan (BoJ) unexpectedly expanded its own version of quantitative easing. This announcement came shortly after an inflation report showed that Japan’s CPI, excluding food and energy (and further adjusted to exclude the recent tax increase) has dipped to 1%, meaningfully below its target.
For now, we continue to expect a world in which U.S. growth overshadows that of other developed countries, resulting in a strong dollar and weaker commodity prices. However, this situation could in turn lead to extraordinary stimulus measures by other central banks which, in turn, could benefit their stock markets. Accordingly, we continue to favor Japanese stocks, which should enjoy the tailwind of aggressive monetary policy by BoJ, much as the U.S. has had from the Fed for the past several years.
Source: 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.
