Related: 3 Japan ETFs Look Like Bargain Picks
The message is straightforward. Japanese equities at current levels appear attractively valued relative to the recent past; and the threat from FX appreciation appears exaggerated due to the top-line sales and valuation cushion.
To wit: even if the yen were to appreciate to ¥100/$ and sales growth were to drop from up 6.5% last year to up 4% this year, TOPIX “fair value” could still leave almost 14% upside if the PE multiple reverts back to the 10-year average of 16x.
Finals Thoughts on Upside EPS Surprises in Japan
Key trigger points for the year should come during the next earnings season, which gets going by the end of April. We expect conservative corporate guidance to set the stage for a new positive-earnings-revisions up-cycle to start from late-summer/early autumn.
This article has been republished from Wisdom Tree.