In a report released by the investment firm entitled Cyclical Outlook: Asia-Pacific, it is argued that the “bright spot” in Japan is its corporate sector.
Pimco managing director and head of portfolio management in Japan, Tomoya Masanao, indicated that exporters are benefiting from domestic policies and external developments.
“Exporters’ profits should rise with the US growth recovery and the depreciation in the yen to date,” Mr Masanao said.
“Domestic- focused corporates will also be likely beneficiaries of lower oil prices, which mitigate the adverse effect of the currency devaluation on input prices.
“Planned corporate tax cuts, corporate governance codes, other pro-business policy initiatives and, importantly, political stability are having important positive effects on corporate behaviour,” he said.
Consumption growth is also set to improve as a result of an increase in nominal wages, said Mr Masanao,
However, while there is notable economic improvement, the sustainability of this growth is questionable, Pimco added.
Sydney-based Pimco executive vice-president and fixed income portfolio manager, Adam Bowe, nonetheless noted the expectation of Japan’s growth.
“Our outlook for Japan has not changed materially, and we continue to expect growth to recover from last year’s technical recession, following the expansionary policy decisions late last year to delay the next value-added tax (VAT) hike and increase the size of the Bank of Japan’s (BOJ's) easing program,” Mr Bowe said.
Mr Bowe expects the BOJ to continue its “aggressive monetary policy and possibly ease further, which should remain one of the key drivers of our global investment strategy”, he said.
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