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AAA-rated Hideo Shiozumi: Japan isn’t even halfway through its bull market

by Robert St George on Apr 03, 2014 at 07:20

Shiozumi also bet that Japan would weather this month’s increase in its consumption tax from 5% to 8% thanks to government support for the economy.

‘Mr Abe will have to make a decision in October about the next round of the consumption tax increase. If the economy is improving between July and September, Mr Abe will make the decision to increase the consumption tax from the current 8% to 10% at the end of next year,’ Shiozumi said.

‘I think Abe will do everything to keep the economy growing so that he can effect another consumption tax increase, which is good for Japan’s fiscal health.’

On the strength of the country’s currency, he believed that the yen would remain in its current range of between 101 and 105 against the dollar, given countervailing pressures on the exchange rate.

Monetary intervention if the economy does suffer could depress the rate. ‘The yen could weaken to close to 105 some time in the second quarter of this year. Depending on the economic situation, I think the Bank of Japan might effect further monetary easing so that economic growth will not drop.

Set against that, though, is an improving outlook for inflation. ‘At the moment, consumer prices are increasing by about 1.3% or 1.4%. But if we see higher inflation towards the end of this year, the yen will probably strengthen slightly.’

Shiozumi concluded: ‘I don’t think the yen will move very widely this year.’

His Legg Mason Japan Equity fund tops its Citywire sector over both three and five-year periods. On a three-year view it has returned 101.2%, compared with an average of 10.4% from the peer group and 6.1% from the Topix.

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