He believes the outlook for Japanese equities will be heavily influenced by how policymakers in the country respond to the new normal.
Perkins says one of the risks is that the Bank of Japan lifts interest rates too soon in order to combat inflation, and reduce the growth rate in the economy.
On the corporate side, he says that for the economy to grow, the reforms discussed above will have to work, and also that the private sector comes to expect such changes to be permanent in nature.
Nikko Asset Management chief strategist Naoki Kamiyama notes that the Japanese economy slipped into recession in the fourth quarter of 2023, and that this has the capacity to dent stock market returns.
He says the key to returns from here will be whether consumption picks up, as wages have been rising at less than the rate of inflation, but that as inflation has come down, so real wage growth has been restored.
Kamiyama adds that this may be needed in order to maintain equity market growth.
david.thorpe@ft.com
