What’s Driving Japan’s Market Momentum

Summary

Recorded at the Morgan Stanley and MUFG Japan Summit, the panel discusses Asia's management of the energy shock and Japan's reflation story. Equity strategist Jonathan Garner recommends overweighting Japanese equities over emerging markets, citing a capex super cycle and AI/tech diffusion with a TOPIX target of 4,300.

• Asia has managed the energy shock with limited pass-through to consumers, but fiscal burdens are rising.
• Japan's economy is resilient but faces a short-term slowdown from terms-of-trade shock.
• Japan is expected to return to above 4% nominal GDP growth next year.
• Jonathan Garner prefers Japanese equities over emerging markets for Asia portfolios.
• The capex super cycle and AI/tech themes drive the bullish Japan equity view.
• Consumer-related sectors are experiencing earnings downgrades, while tech and defense see upgrades.
• TOPIX base target is 4,300, implying about 12% upside.
• EM earnings growth is concentrated in Korea and Taiwan, making Japan more attractive.