Some of you may recognise the title as a line in the chorus of a song by the Vapours, way back in the 80’s. The rest of you may be none the wiser!
Regardless, it aptly reflects our views about investing in Japan. Equity markets surged on Friday of last week as the Bank of Japan unexpectedly cut interest rates. We have liked Japan as an area for investing for some time now in the belief the Japanese authorities will do whatever it takes to stimulate the Japanese economy. The rate change further reinforces this view.
Japan, like all equity markets, has been volatile so far this year. Falling oil prices, weaker sentiment from China and a slowdown in global growth has caused consternation amongst investors on fears of a hard landing. We have believed central banks and governments will do whatever it takes to provide confidence and Friday’s reduction of a benchmark rate to below zero was evidence of how such stimulus can be used to effect.
Equity markets were also lifted by Microsoft leading a rally in technology shares and weak 4th quarter GDP data. This was interpreted as meaning aggressive rate hikes in the US to be less likely.