Balanced view

Article Abstract:

Japanese investors have tended to favor bonds rather than equities but this appears to be changing and bond yields are rising. The Japanese economy is undergoing a recovery which is not reflected in interest rates. Deflationary pressure has led to concern about Japanese growth levels, while elsewhere there is more concern about capacity constraints. Lower bond yields tend to be seen as good for stocks but this is not the case in Japan due to its particular economic situation, argues Dresdner Kleinwort Benson.

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Patience is leaden

Article Abstract:

Japanese share prices have underperformed in terms of world share prices. Corporate earnings are under pressure. There may not be a recovery in the Japanese stock market until a year from Sep 1996. Shares appear cheap in relation to bonds. The stock market should be helped by very low interest rates and if it does not recover when rates are low it is difficult to assess when it will recover. Japan is still attractive for investors seeking to diversify.

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