The Japanese stock market has been a topic of interest for investors around the world. With the economy showing signs of recovery, many stakeholders are keen to understand what’s driving the growth and how they can benefit from the same.
One of the most talked about indices in the country is the Nikkei. Recently, the Nikkei posted solid gains, primarily driven by the strength of exports and a weaker yen. In this article, we take a closer look at the latest Nikkei business news and analyze the different factors that are shaping the Japanese stock market.
Exports Driving Growth
For Japan, exports are a crucial component of economic growth. In the latest numbers released in January this year, the country’s exports surged by a whopping 11.8% year on year driven by demand from China and the US. This is significant for the Nikkei index as it is highly sensitive to fluctuations in currency and global trade.
With the US President Joe Biden assuming office, market experts are hoping for a more predictable trade policy. There are also expectations that Joe Biden might look to rebuild American infrastructure, which could fuel demand for Japanese exports and further boost the Nikkei.
Weaker Yen Boosting Corporate Earnings
Another critical factor driving the Japanese stock market is the weaker Yen. The Yen has weakened against the US dollar significantly and is currently trading at around 106 Yen to the US dollar. A weaker yen is good news for Japanese exporters as it makes their products cheaper overseas, and in turn, drives profits.
Corporate earnings from Japan’s export-oriented businesses were strong in Q4 2020, and there’s every indication that the trend will continue. The expectation is that the Nikkei will benefit from this boost in corporate earnings, and so investors are looking to add exposure to equities of these companies.
Positive Vaccine News
Along with the above factors, the positive vaccine news has also lifted investor sentiment. Japan’s vaccine roll-out has been slow, but there are hopes that the country will increase its vaccination pace in the coming months. This development bodes well for the Japanese stock market as it provides a glimpse of hope for industries severely affected by the pandemic.
Closing Thoughts
The Japanese stock market is showing signs of resilience, and the Nikkei index continues to post steady gains. With a combination of factors such as a weaker yen, strong corporate earnings, and a recovering global economy, the Nikkei presents a compelling opportunity for investors looking to gain exposure to Japan’s growth story. However, investors should be mindful of the risks associated with investing in international equities and should consult with a financial advisor before planning any investments. In conclusion, the growth of the Japanese stock market, particularly the Nikkei index, presents an exciting opportunity for those willing to take a calculated risk in an increasingly uncertain market.
(Note: Do you have knowledge or insights to share? Unlock new opportunities and expand your reach by joining our authors team. Click Registration to join us and share your expertise with our readers.)