Related: Japan ETF Celebrates Prime Minster Abe’s Re-Election
Investors feared that if Shinzo Abe’s party failed to pull through in this election cycle, the government may enact a premature tightening of its monetary and fiscal policies, which could trigger a stronger yen currency and a return to deflation.
“The BlackRock Global Allocation Fund is overweight Japanese equities,” according to a BlackRock note. “In addition to attractive valuations, we are encouraged by the broad improvement in corporate governance of Japanese companies and the economy growing well above trend. Corporate earnings are robust and forecasts suggest they may be heading higher.”
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.
The strengthening economic and corporate outlook may also attract foreign investors, especially with a clearer political outlook. Masaki Motomura, an equity strategist at Nomura in Tokyo, expects foreign investors to be buyers following the election “as they prefer steady political conditions in Japan,” according to the Financial Times.
For more information on Japan, visit our Japan category.