Julius Baer Sticks to Bullish Japan Call Despite Strengthening Yen
Julius Baer remains optimistic about Japanese equities despite a stronger yen. In a recent analysis, Louis Chua, equity research analyst Asia at Julius Baer, pointed out that 72% of companies in Japan have beaten consensus earnings estimates and 68% have exceeded revenue forecasts.
The strong earnings season in Japan is driven by a higher-than-usual number of companies revising up their full-year guidance following the results. Chua expects high earnings visibility and strong earnings momentum to continue, supporting the recovery in Japanese equities.
However, the yen has strengthened since the joint currency intervention by the US and Japan, with the dollar/JPY down to 157.80 as of August 7 from a recent high of 163.86 on July 28. Chua noted that historically, Japanese equities have fared well alongside a weaker yen.
Despite this, Chua maintains a positive view on Japanese equities due to healthy earnings momentum and upside from continued structural reform. The Nikkei 225 trades at a forward price/earnings ratio of 20.7x compared to its recent high of 24x.