Japan’s Nikkei share average increased by 1.05% to 38,504.11 by midday, recovering from a 1.8% drop in the previous session. The Topix index also saw a rise, gaining 0.74% to reach 2,719.92. This rebound followed a steep drop in the Nikkei, prompting investors to buy stocks, as noted by the chief equity market analyst at Tokai Tokyo Intelligence Laboratory. Despite this activity, there is no significant news propelling the index substantially higher or lower. Key contributors to the Nikkei’s increase were Tokyo Electron and TDK, with their stocks rising by 2.41% and 7.22%, respectively. Nonetheless, concerns about the Bank of Japan’s (BoJ) policy, particularly regarding its plan to reduce bond purchases, continue to influence investor sentiment.
The Nikkei’s rebound indicates a market correction after a sharp decline, suggesting a stabilisation phase. However, the BoJ’s plan to reduce its nearly $5 trillion balance sheet and its unchanged interest rate target range of 0-0.1% introduces a layer of uncertainty. Investors are keenly awaiting the BoJ’s announcement in July, which is expected to play a crucial role in shaping future market dynamics. Japan’s central bank is proceeding cautiously with its plans to reduce bond purchases while maintaining ultra-low interest rates. According to a senior general manager at Shinkin Asset Management, a rate hike next month seems improbable due to a lack of supportive macroeconomic data. This caution is reflected in the pharmaceuticals sector, which saw a 0.95% decline, marking the worst performance among Tokyo Stock Exchange’s 33 industry sub-indexes.
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