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Schroders' Rose: expect further Japan gains in 2014
by Matthew Goodburn on Dec 18, 2013 at 11:47
Japanese equities veteran Andrew Rose says there are still reasonably strong gains to be made in the country's stock market despite the sharp rises of the past year.
The Citywire AA-rated Schroder Tokyo fund manager does however believe the initial measures of prime minister Abe's 'third arrow' - structural reform - have so far proved disappointing.
Rose said: 'Markets have run strongly over the past 12 months and what could have gone right has gone right, but there is still cause for optimism.'
'The first two arrows have been fired successfully but the third, growth strategy, lies ahead. No one is going to argue about printing money and spending more money, but structural reforms is a much tougher ask, and so far the third arrow measures have proved disappointing.'
Rose says that Abenomics optimists had been hoping for more concrete measures to deal with an inflexible labour market and pension reforms, but so far efforts in these areas had been muted.
He also points out that what many believed would be a smooth path towards joining the Trans- Pacific Partnership (TPP) has hit a stumbling block after the latest round of talks in Singapore.
Ultimately however he expects Japan to join its Pacific Rim partners in the TPP although that process may now have been pushed out by a further year or two.
Rose said the recent resilience of the stock market had been closely correlated with the weakening yen.
'The market has gone up as the currency has weakened, mainly on the back of expectations of tapering in the US.'
However, with the yen trading at around 1.03 to the US dollar, Rose does not expect it to weaken much further from here, despite concerns in some quarters that next April's consumption tax hike will cause it to fall further.
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