Three misconceptions about Japanese equities

Long-term investors in Japanese equities have seen their hopes dashed many times. Like the famed cherry blossoms in spring, a stock market rally might flourish once in a while, only to wither and fade. In 2023, investors once again flocked to a booming stock market, certain that this time would be different. We don’t disagree, but we believe that investors have three misconceptions about the drivers of the current stock market rally – and that only once reality matches perception will the Japanese stock market fully benefit from the profound changes underway. These misconceptions concern corporate governance reform, central bank policy, and public perception of inflation.