The Bank of Japan (BOJ) has embarked on policy normalisation, ending its negative interest rate policy (NIRP) and abolishing its yield curve control (YCC). The BOJ will also limit its maximum bond purchases across different yield tenors and end the buying of TOPIX exchange-traded funds and Japan REITS.
With the removal of the policy normalisation overhang, we are constructive on Japan equities. We believe the end of negative rates is a positive for Japanese corporates given their low debt and high cash levels. Having cash is no longer a drag on their income.
We focus on big caps quality stocks in Japan which lead in innovation and global presence. These are in economic heavy weight industries such as autos, automation, electronics and electricals. We prefer consumer stocks where earnings are exposed to global consumers.
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