Willerequity Japan p - Willerfunds

With company FY3/13 forecasts currently assuming an average USD/JPY of ¥81.93, upcoming results announcements are likely to contain positive surprises. However, the Bank of Japan March Tankan indicates that FY3/14 company forecasts will be based on a conservative rate assumption of ¥85.22/USD. However, even if companies announce modest FY3/14 growth forecasts at upcoming results announcements, it is not necessarily going to disappoint investors. Instead, we think the market is likely to interpret such conservative forecasts as leaving plenty of room for upward revisions.

Abenomics is not fully factored in yet. The impact of Abenomics has not yet spread to the domestic economy. In time a weaker yen and a reduction of corporate tax should bring more domestic investors to the market. The approval ratio of Abe’s cabinet is almost 73%. We think that the Liberal Democratic Party (LDP) will get a majority in the Upper House election, and Abe’s cabinet will continue longer. The stock market rallies and outperforms the US when administrations last a long time (Eisaku Sato 2798 days the Topix up 219.7%, the S&P500 up 27.6%; Junichiro Koizumi 1980 days 14.0%, 8.2%; Yasuhiro Nakasone 1806 days 222.5%, 85.7% in local currency respectively).

We will continue to actively invest in exporters (auto, machinery, electrical, chemical and precision) as well as domestics (real estate, construction, financial and retail), excluding defensive stocks (food, pharmaceutical and utilities).

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