Inflation is positive for Japan and BoJ wants it to sustain

Japan's economy has been stuck in a negative feedback loop of low growth, low inflation and interest rates since the asset bubble burst in the late 1980s. An environment of little to no inflation reduced the desire to raise wages, to invest and to spend. But the return of inflation can mean corporate investments in productivity, in growth and a consumer desire to spend. As the purchasing power of cash erodes, investors could reallocate into Japanese equities and with higher rates, Japanese bonds may start to look attractive relative to foreign bonds, according to Izumi Devalier. Machinery analyst Kenjin Hotta highlights the particularly attractive Japanese factory automation sector. One that benefits from global supply chain shifts, investment in EVs and where growth can be another positive for the Japanese economy.

 

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