Middle East tensions and currency volatility have caused Japan¡¯s record stock rally to falter, but the weakness looks temporary as solid corporate fundamentals and the long-term outlook for artificial intelligence provide support.
That¡¯s the view of Koji Nakatsuka, chief investment officer for Japan equity at Allianz Global Investors, which manages $2.4 trillion in assets globally. ¡°If everything gets normalized, the Japanese stock market has an upside potential toward the end of the year. The Nikkei may return to its record high levels by year-end,¡± he said.
Japanese stocks have come close to a technical correction after surging to all-times highs earlier this year, as traders slashed bets on the Federal Reserve¡¯s interest rate cuts. That spurred renewed strength in the dollar and pressured the yen, which has weakened to nearly ?155 against the greenback. It¡¯s a level that has raised concerns on possible intervention by authorities and triggered warnings from Wall Street brokerages, at a time when rising geopolitical stress is prompting a flight to safety.
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