AGF Logo
  • Home
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Français
  • AGF.com
Skip to content
AGF logo
Insights and Market Perspectives
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Contributors
  • Français
  • Search
Search
Close
Abenomics is driving Japanese growth

  • Investing and Market Views

For Print Only Logo
Insights and Market Perspectives

Abenomics is driving Japanese growth

Author: Portfolio Specialist Group

January 19, 2018

Japan has recorded eight straight quarters of positive GDP expansion, its longest streak in 16 years, leading to sustained market growth. While the Bank of Japan jumpstarted its economy with significant quantitative easing measures, it has been Prime Minister Shinzo Abe’s structural reforms, aptly referred to as ‘Abenomics’, that are being credited with driving recent strength in the world’s third largest economy.

Under Prime Minister Abe’s control, immigration has increased significantly as Japan combats an aging population and naturally, a reduced labour force. Indeed, the number of immigrants living in Japan has nearly tripled, reaching 1.8% of the population in 2015 as compared to only 0.7% in 1980. Abe has also made a big push in getting more women into the workforce over the past few years, with belief that this will lift household income, leading to increased spending and overall economic growth. This Abenomics initiative is clearly working, with latest data showing the female participation rate has reached multi-decade highs of 51.5%, which is leading to a lower overall unemployment rate as well.

 

Source: Cornerstone Macro Research, January 2018

Most recently, PM Abe has introduced legislation that will lower the corporate tax rate to 25%, from around 30%, for companies that raise wages by 3% or more, again with the intention of boosting household spending. Japanese Financials will likely come out a big winner of this, as shown below. In other sectors, it comes down to the size of the company as many small businesses are already paying less than a 25% tax rate, making the initiative irrelevant. It is expected, though, that many large- and mid-size firms will take Abe up on his offer, and should be supportive of higher corporate profits.

 

Source: Cornerstone Macro Research, January 2018

In their most recent outlook, the AGF Asset Allocation Committee further increased their conviction towards Japan to a maximum overweight position, supported by these reforms and several others. Since its inception in late-2012, Abenomics has been successful in easing financial conditions, increasing corporate profits and in turn, offering attractive investment opportunities. While Japan does face risks related to stubbornly low inflation, slowing growth in China (a major trading partner) and ongoing uncertainty in nearby North Korea, we continue to watch for Japan to lead market growth in the near-term.

 

 

Commentaries contained herein are provided as a general source of information based on information available as of January 15, 2018 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

 

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2022 AGF Management Limited. All rights reserved.

Written by

Portfolio Specialist Group

Portfolio Specialist Group

AGF Investments Inc.

More from Portfolio Specialist Group

  • Investing and Market Views

The Great Disconnect

February 13, 2018

Get perspectives straight to your inbox.

Subscribe now

More articles like this.

Will the Fed and Other Central Banks Get It Right?

  • Investing and Market Views

Will the Fed and Other Central Banks Get It Right?

Kevin McCreadie | May 20, 2022

Investors should expect market volatility to continue until it is better understood what impact tighter monetary policy will have on inflation and economic growth, says AGF’s CEO and Chief Investment Officer.

Read More
What Happens to Industrial Stocks When Supply Chain Issues Ease?

  • Investing and Market Views

What Happens to Industrial Stocks When Supply Chain Issues Ease?

Wai Tong | May 19, 2022

Transport stocks may be in for one of the bigger shake ups

Read More
Why Food Inflation Has an Outsized Impact on Emerging Market Bond Investors

  • Investing and Market Views

Why Food Inflation Has an Outsized Impact on Emerging Market Bond Investors

Tristan Sones | May 12, 2022

Some EM countries will benefit while others will be adversely affected, write AGF’s Co-Heads of Fixed Income.

Read More
AGF Logo
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
Follow AGF

AGF Web Site Pages © 2022 AGF Management Limited. All rights reserved.

Links
  • Terms & Conditions
  • Privacy
  • AGF.com