Stay in sectors where Japan has a global competitive edge

Chief Investment Office 4 Apr 2022

Japan’s economy is likely to return to negative territory as omicron spreads, hindering the resumption of economic activities. The development of the Russia-Ukraine crisis would also hurt the nascent recovery.

  • Japan equities sold off in line with the rest of the world on the outbreak of the Russia-Ukraine conflict.
  • While not directly impacted by the crisis, a spiralling oil bill will have a heavy impact on the economy.
  • As Japan is still struggling with Covid recovery, higher inflation would affect domestic sentiments further.
  • The outlook for Japan’s electronics exports is intact, and the Russia-Ukraine conflict could extend the tightness in supply and drive pricing power.
  • We recommend staying in sectors where Japan has a global competitive edge, such as autos, automation, semiconductor sectors; and stick with quality big stocks that can manage costs better.