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Japan

February 2012

  • The Topix gains 3.7%.
  • Japanese economic data offer some cheer.
  • Yoshihiko Noda wants to double Japan’s sales tax.

Japanese equities made an improvement on the previous month’s almost-flat return in January. The Topix index was up 3.7% in yen, total return terms.

At sector level, financials (excluding banks) were the top performers over the month. Machinery stocks also did well, while information technology and pharmaceutical companies were in the doldrums.

Japanese exporters had a tough start to the month, however. Toyota and Honda were in the spotlight after their US sales fell sharply in 2011. The strong yen and the floods in Thailand have had negative consequences for both companies. Meanwhile, chipmakers felt a bit of a January chill after Nomura reduced its estimate for global shipments of dynamic random access memory chips. Despite this, Elpida Memory received a boost later in the month, after rumours emerged of a tie-up with Micron Technology. In other company news, Olympus, the beleaguered camera maker, received a boost after the Tokyo Stock Exchange announced that it would not be delisted.

Economic data released during the month were relatively cheering. A Cabinet Office report revealed that machinery orders had jumped to 14.8% in November, a four-year high. The increase gives hope that Japanese companies are continuing to invest, despite the strength of the country’s currency and the effects of the slowing global economy. December’s retail sales and industrial production figures also beat expectations.

Finally, popularity ratings for Japan’s sixth prime minister in five years, Yoshihiko Noda, fell further after he made a proposal to double Japan’s sales tax to 10% by 2015. Mr Noda says the increase is necessary in order to address Japan’s burgeoning debt levels. His approval rating has now fallen to 32%.

The information contained in this document has been derived from sources which we consider to be reasonable and appropriate. It may also include our views and expectations, which cannot be taken as fact. Investment markets can change rapidly and the views expressed should not be taken as statements of fact, nor relied upon when making investment decisions.

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Scottish Widows Investment Partnership Limited (SWIP) is registered in England and Wales, Company No. 794936. Registered Office is at 33 Old Broad Street, London EC2N 1HZ. Tel: 0131 655 8500. SWIP is authorised and regulated by the Financial Services Authority and is entered on their register under number 193707 (www.fsa.gov.uk).