Japanese Stocks in Recovery Mode

End of Sell-off after Four Consecutive Negative Weeks

Japan's benchmark Nikkei experienced its worst losing streak of the year from July 11 to August 5, plunging more than 25% amid a sell-off in global equities and a reassessment of popular carry trades, which pushed the yen higher against the dollar following the Bank of Japan’s hawkish pivot at the end of July.

Since that downward spiral, the Japanese index has regained strength, rebounding along with technology stocks, especially as the Bank of Japan calmed the situation. BoJ's influential deputy governor, Shinichi Uchida, said last week that the central bank will not hike interest rates when markets are volatile.

Strong Rebound but Partial Recovery

As a result, Japanese stocks experienced a strong rebound, further boosted by better-than-expected retail sales data in the U.S., which soothed fears about slowing economic growth. Overseas investors have massively reinvested in Japanese stocks, reversing three consecutive weeks of net selling. The flagship index of the Tokyo Stock Exchange gained 8.67% over the week, bringing its year-to-date performance back into double digits (up 13.74%).

Japanese Stock ETFs on the rise

ETFs replicating Japanese equity indices have logically benefited from these bargain purchases. The iShares Core MSCI Japan IMI UCITS ETF (IJPA) and the Amundi MSCI Japan UCITS ETF (LCUJ) climbed 5.83% and 6.49% respectively.

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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.