Kuala Lumpur, Malaysia – For decades, international investors shunned Japan’s stock market, whose meagre gains mirrored the country’s protracted economic stagnation.
These days, Japanese stocks are the hottest game in town as the Nikkei 225 index rides a 34-year high.
After limping through Japan’s “lost decades” following the collapse of a massive asset bubble in the 1990s, Tokyo’s benchmark index last year gained 28.2 percent, comfortably beating the S&P 500 in the United States.
There are no immediate signs of the buying frenzy slowing down.
In January, the Nikkei 225 climbed a further 8 percent, with foreign investors buying a net 956 billion yen ($6.5bn) of Japanese stocks in the span of a single week.
Some market analysts believe that 2024 could be the year the Japanese stock market finally tops its 1989 peak of 38,915.87.
For Japan, the world’s third-largest economy, it has been a “dramatic recovery story”, said Nicholas Smith, Japan strategist at investment group CLSA.
“Profitability is recovering rapidly from depressed levels. Profit growth is growing strongly while others are stumbling. Price/earnings is relatively low and growth is high,” Smith told Al Jazeera.
“What’s not to like? Companies are starting to return their cash piles to shareholders.”
For foreign investors, a confluence of factors has made Japanese firms appear more attractive than they have in decades.
Recent corporate governance reforms driven by the Tokyo Stock Exchange have led Japanese companies to seek to increase shareholder returns through share buybacks and higher dividend payouts.
A weak yen, hovering at its lowest levels since the 1990s, has boosted corporate profits and made Japanese stocks, already cheap by international standards, even better value.
Warren Buffett has invested heavily in the Japanese stock market [File: Bloomberg]
Billionaire investor Warren Buffett, the most high-profile booster of Japanese stocks, cited the “ridiculous price” he was offered for stakes in Japan’s five biggest trading companies as a reason he snapped up $6bn in their shares during the COVID-19 pandemic.
Under Prime Minister Fumio Kishida’s “new capitalism” drive, Tokyo has also sought to encourage a shift from saving towards investing, relaunching its Nippon Individual Savings Account (NISA) programme with higher annual investment limits and extended tax-exemption periods.
There have also been signs that the Japanese economy may at last be starting to emerge from its decades-long deflationary spiral, with workers last year seeing their biggest wage increases since the early 1990s.
Ryota Abe, an economist at the global markets and treasury unit of Sumitomo Mitsui Banking Corporation (SMBC), said expectations that wage growth will continue to pick up has been the biggest of several drivers of the stock market rally.
“Recent events are suggesting that what has changed in the society the most is that business leaders in Japan have started contemplating more seriously the need for constant wage growth given the inflation situation and corporates,” Abe told Al Jazeera.
Japanese stocks have also benefitted from the lagging fortunes of other markets, particularly China.
As China’s economy grappled with challenges ranging from Beijing’s crackdowns on private industry to a slow-moving real estate crisis last year, foreign investors pulled $29bn out of the Chinese stock market, erasing 90 percent of inward investment in 2023.
Still, analysts differ on how long Japanese stocks’ moment in the sun might last.
Martin Schulz, a senior researcher with the Fujitsu Research Institute, said Japan’s stock market has the potential to keep delivering big returns as corporate leaders push for greater productivity and higher payouts to shareholders.
“While the upside is limited in a slow growth economy, leading companies that gain from long-term trends, such as digitalisation, renewable energy, Asian economic integration, are still lagging their peers in valuation,” Schulz told Al Jazeera. “They have room to grow.”
Others see a comedown on the horizon.
The yen is expected to rise significantly against the dollar this year as the US Federal Reserve begins cutting interest rates, which would undercut the affordability of Japanese stocks.
Taiki Murai, a doctoral researcher at the Institute for Economic Policy at Leipzig University, said Japan’s attractiveness will fade as business sentiment in the United States and Europe improves in a lower interest rate environment.
“As a result, international capital flows would likely leave Japan in search of higher yield,” Murai told Al Jazeera.
Japan’s economy has stagnated since the collapse of a massive asset bubble in the early 1990s [File: Kiichiro Sato/AP]
There are also differing views about the extent to which Japan’s stock rally foreshadows a broad-based economic revival.
After promising signs in 2023, wage growth has recently stalled. Structural issues, including a shrinking population and a rigid labour market that has resisted reform, continue to cloud the long-term outlook for growth.
Smith of CLAS expressed optimism about the direction of recent economic trends.
“Government, the ministries and shareholders are working together in a way I have never seen before in my 35 years in the country,” he said.
Murai, the researcher at Leipzig University, said the strong performance of the stock market does not remove the serious challenges facing the Japanese economy.
“Prime Minister Fumio Kishida’s new capitalism has postponed comprehensive structural reforms of the Japanese economy. Shinzo Abe, former prime minister, had also included a structural reform in his economic policy package ‘Abenomics’, but only fiscal and monetary expansions were implemented,” he said.
“Moreover, there has been little or no positive news from the Japanese corporate sector regarding innovation.”
Abe, the economist at the Sumitomo Mitsui Banking Corporation, said the outlook for the economy will become clearer after wage negotiations between firms and employees in the spring.
“We have to continue keeping an eye on the actual expenditure as well as wages rise in the later part of this year for us to be able to see the virtuous cycle between wages and expenditure in the economy,” Abe said.
“I want to see more changes in the deflationary mindset among the Japanese,” he added. “If this is the case, I will become more confident about higher stock prices.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
