Be wary of the impact of the Nikkei average plunging for two days in a row and the intensifying conflict between the United States and China on Japanese stocks

This article is a reprint from “Toushiru” provided by Rakuten Securities, “Understanding in TOP 3 Minutes! Today’s Investment Strategy”. Today’s point The Nikkei average has plummeted for two days in a row, and the US-China conflict, which has seen a large decline in Japanese stocks, threatens the world economy and stocks again. Introducing the views of Mr. Masayuki Kubota, Chief Strategist, Rakuten Securities Economic Research Institute. The Nikkei average plummeted for two days in a row, and the decline in Japanese stocks was large. The Nikkei average on April 21 was 28,508 yen, down 591 yen from the previous day. It plummeted for the second consecutive day, and the rate of decline for the two days was 1176 yen (4%). It is expected that a state of emergency will be issued in Osaka, Tokyo, etc., and there was concern that Japan’s economic recovery would be delayed, which triggered the plunge. On April 21, the Bank of Japan purchased 70.1 billion yen of Japanese stock ETFs (Exchange Traded Funds) for the first time in April. Even so, the Nikkei average did not rebound significantly in the afternoon. Japan has the largest decline because it has plummeted due to factors unique to Japan.

Comparison between NY Dow and Nikkei 225: October 1, 2020-April 21, 2021 (NY Dow until 20th)

Source: Created from Bloomberg data Since mid-March, the weakness of the Nikkei average has been conspicuous while the NY Dow has been strong. I think that the difference in economic momentum between Japan and the United States is directly reflected in the stock price. The US economy is currently recovering. If the Biden administration further mobilizes $ 1.9 trillion in fiscal measures against corona, it is possible that the US economy will overheat in the second half of the year. On the other hand, in Japan, corona vaccination has been delayed and consumption recovery has been delayed. So, with a third state of emergency, the gap in economic momentum with the United States could widen further. Still, the author thinks that Japan’s business-sensitive stocks should be bought at the bargain. If a state of emergency is issued, the stagnation of the food service, tourism, events and aviation industries is expected to be prolonged. However, it is expected that the recovery of business performance of automobiles, semiconductors, shipping, steel, non-ferrous metals, chemicals, etc., which will benefit from the expansion of the Chinese and US economies, will continue. Therefore, we judge that it is an opportunity to buy more stocks centered on economic sensitive value stocks. However, there is one problem that is of concern. There are signs that the US-China conflict will intensify. Japanese companies, which have strong economic ties with China, are at risk of being caught up in the US-China conflict and suffering damage. There is a risk that the impact of being involved in the US-China conflict will become a more serious problem than the impact of a state of emergency.