Reforms and China woes put ‘lucky’ Japan back on the map
Many factors explain Japan’s renewed allure to global corporate and financial institutions. Inbound FDI is rising, with local stock prices regularly hitting record highs. Is the economy’s long-awaited renaissance a passing phase or here to stay?
For Japan, 2023 was not perfect by any means. But it was as good a year as Asia’s second-largest economy has enjoyed in a long time.
The IMF tips the economy to have grown 2% last year, the highest figure since 2010. After years of deflation or very low inflation, price growth is back on the agenda. Inflation averaged 3.4% over the 12 months to the end of November 2023.
More shockingly, thanks to rising corporate earnings and a cheap currency less vulnerable to foreign-exchange oscillations, share prices are once again heading in the right direction.
On January 15, the Topix index, a broad measure of Japanese stocks, broke through the 2,500-mark for the first time. The same day, the Nikkei 225 stock average, busy notching a series of record highs, flirted with the 36,000-mark, a further sign of the premium global investors currently place on local equities.
Policymakers still face plenty of challenges ahead. After a strong start to 2023, growth contracted 2.9%