Related: Japan ETFs: Abe’s Win Extends ‘Abenomics’ Outlook
The Tokyo equity market remains in a bullish mode, with the central bank’s tankan survey of business sentiment revealing confidence at its highest level since 1992. Japanese equities also show more attractive valuations, compared to the pricier U.S. markers. For instance, EWJ shows a 15.42 price-to-earnings and a 1.2 price-to-book, whereas the S&P 500 index is trading at a 18.9 P/E and a 2.6 P/B.
“We believe the Abe government will push ahead with a planned increase in the country’s sales tax but allocate the new revenue to children’s education and paying for swelling social security spending,” adds BlackRock. “It may also push back the government’s target for achieving a balanced budget to 2020 or later. That would be a negative for bonds and may prompt downgrades of Japan’s credit rating.”
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