But there is also bad news out of Japan:
Nope not in that direction:
Up towards 18,000 in fact from it’s current bear-wrought 12,500 or so That’s Nomura’s bet at least and good luck to them A taste:
We have raised our end-2013 forecasts to 18,000 (previous forecast: 16,000) for the Nikkei Average and 1,500 (1,350) for the TOPIX, despite the market’s recent “new phase of declines” The assumptions on which our forecasts are based have changed from “little sign of recovery in earnings” and “expectations for Abenomics” to “earnings recovery” and “rise in global P/E ratios” We expect FY13 TOPIX-EPS to reach 82.5, surpassing its previous record high of 80 Japanese stocks are once again trading at lower P/E ratios than US stocks Assuming that Abenomics has not been defeated, we see no reason to become bearish on Japanese stocks, and recommend a bullish stance> We think the full impact of Abenomics on capex and household incomes has yet to be felt, which means that there are still substantial investment opportunities in these areas Our current recommendations are: (1) stocks generating strong earnings; and (2) stocks likely to benefit from the government’s growth strategies We reiterate our view that Japanese companies need to be extremely determined if they are to achieve new record highs for ROE
It is looking increasingly likely that the BOJ will take additional action now that the market environment has diverged from its initial expectations It is possible to conclude from this that the new phase of monetary easing is finally getting on course There appears to be something of a pause in the development of its growth strategies, but the Abe administration has responded quickly to market participants’ disapproval by revealing its intention to come up with further growth strategies, which we see as a positive The Upper House elections are scheduled for 21 July, and if the government looks likely to pursue its growth strategies, which constitute the “third arrow”, after the elections too, this should boost the stock market
A little more from Nomura’s note, which is the usual place The conflict between short term ‘fixes’ and longer term goals features prominently As it does in that chart near the top…
Abenomics revolves around steering Japan out of deflation via a combination of bold monetary policies, flexible fiscal policies, and growth strategies However, it faces a number of major obstacles; namely, (1) the markets regard a 2% inflation target as high, (2) the weaker yen has pushed up import prices but there has been only a limited improvement in incomes, and (3) long-term interest rates will have to be kept lower than nominal growth in order to avoid fuelling concerns about the government’s fiscal debt problems. We all remember situations when the stock market has been in turmoil and undergone a series of sharp declines because of concerns about how far long-term interest rates would be allowed to rise In this environment, it is difficult for Abenomics to stoke positive expectations
If share prices fall back to where they were before the BOJ announced its new phase of monetary easing (the 3 April Nikkei Average close of 12,36220), this could prompt market observers to pronounce Abenomics a failure The view that Abenomics has failed is likely to be accompanied by the opinion that the new phase of monetary easing has been unable to bring Japan out of deflation If Japan returns to square one despite this new phase of monetary easing, we think this will be a tragedy for the Japanese stock market Thus, Japanese stocks have been put in a very difficult position less than one month after the market’s sharp decline on 23 May Precisely because of this reason, we think the outlook for the Japanese stock market might vary quite substantially depending on whether or not share prices are able to remain at their current levels