By Kevin Buckland
TOKYO, November 21 (Reuters) – Japan’s Nikkei 225 stock average .N225 will continue its more than 28% rise this year in 2024 to reach a three-decade high of 35,000 by the end of June, according to analysts’ estimates in a Reuters poll.
All respondents anticipate continued earnings growth, although many also expect the tailwinds of a weaker yen to begin dissipating with the Bank of Japan nearing the end of super-accommodative stimulus and the Federal Reserve’s tightening cycle.
The median forecast for the Nikkei’s level by mid-2024 was 35,000, with responses ranging from 31,143 to 39,500, the Reuters poll of 10 stock strategists taken Nov. 10-20 showed.
Japan’s equity benchmark began this week by pushing to its highest level since March 1990 at 33,853.46 after a three-week winning streak.
The rally was partly driven by a robust earnings season, as the yen fell to a one-year low above 150 per dollar. JPY=EBS during the period boosted exporters’ profit prospects and as companies passed on higher costs to consumers – something that would have been almost unthinkable pre-pandemic.
Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management in Tokyo, pointed to picked-up demand in both business investment and consumer demand, particularly for services, forecasting the Nikkei to reach 39,500 in June and 40,900 by the end of 2024 – the most bullish forecasts in the an inquiry
“We are constructive mainly because we are optimistic about nominal GDP growth,” he said. “There is still room for equity prices to reflect the better picture in EPS growth.”
At the same time, Kichikawa and other respondents say the yen may have weakened after pushing to the edge of 152 per dollar earlier this month, amid expectations that the Fed could start cutting rates around May. FEDWATCHwhile the BOJ can exit negative interest rate policy at the beginning of next year.
That would mean some stagnation for equities in the latter half of next year, with the Nikkei still at 35,000 at the end of the year, according to the average poll response.
IG Sydney analyst Tony Sycamore is among the most bearish – one of only two forecasters predicting a decline for the benchmark in the latter half of next year, from 35,000 to 33,000.
“35,000 looks about the level where Nikkei gains line up with the timing of the BOJ removing negative interest rate policy,” Sycamore said.
“The Nikkei still has the support of the BOJ behind the curve,” he added. “But at some point early next year, they’re going to have to do what has to be done, and that’s not going to be a great outcome for equities.”
(Reporting by Kevin Buckland; Additional reporting by Junko Fujita and Noriyuki Hirata; Additional polling by Rahul Trivedi and Pranoy Krishna; Editing by Alex Richardson)
((Kevin.Buckland@thomsonreuters.com;))
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