Japanese markets have bounced back strongly after a sharp downturn triggered by the Bank of Japan’s rate rise two weeks ago. The Nikkei index, after experiencing significant losses, has now enjoyed its second strongest trading day of 2024.
On 5th August, the Nikkei plummeted by 12%, recovering slightly from an even deeper 17% decline. This panic was eventually tempered by reassuring statements from Japan’s central bank and government, which helped stabilise the market. What followed was a robust rebound, reminiscent of the recovery seen after the onset of the pandemic in early 2020.
The Nikkei surged by 3.6% on Friday, marking its best weekly performance in more than four years, driven by positive US retail sales data and a strong quarterly report from Walmart, which helped alleviate fears of a US recession. Given the close economic ties between Japan and the US, the strong performance of the US economy has a direct impact on Japanese markets.
The Nikkei closed at 38,062.67, its highest level since April 2020, reflecting an 8% increase for the week. This rally was further bolstered by Japan’s return to economic growth in the June quarter, while Prime Minister Kishida’s decision to step down appeared to have little effect on market sentiment.
The rally was widespread, with 219 of the 225 Nikkei stocks advancing. Major companies saw significant gains, including a 6.2% rise in Fast Retailing (Uniqlo) and a 4.8% increase in chip-related Tokyo Electron. The yen’s overnight weakening against the dollar also boosted Japan’s export-related shares, such as Toyota Motor, which climbed by around 2%.
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