Japan Outlook Most Bullish Since ’09 in Poll on Abe’s Yen

Investors are the most bullish on Japan’s markets in more than three years and confident that Prime Minister Shinzo Abe will weaken the yen to boost exports as he tries to end two decades of deflation.

Respondents who see Japan offering the best opportunities worldwide over the next year rose to 21 percent this month from September’s 5 percent, according to a global poll of investors, analysts and traders who are Bloomberg subscribers. Fifty-four percent said they’re more optimistic than pessimistic on how Abe’s policies affect Japan’s investment climate, up from the 21 percent asked two months ago about predecessor Yoshihiko Noda.

Abe, Japan’s seventh prime minister since 2007, has called for unlimited monetary easing and a doubled central bank inflation target to help revive the world’s third-biggest economy. The Bank of Japan heeded that call, saying today after a policy meeting that it will raise the price goal to 2 percent and move to open-ended asset purchases starting in January 2014.

“We are going through a honeymoon period where investor optimism is running high, but confidence in Prime Minister Abe’s reflationary policies is key to sustaining current market trends,” said respondent Gregory Doger de Speville, an analyst at Fleming SG Capital Pty in Perth, Australia. Abe “has promised some bold actions on the both the monetary and fiscal front, which seem to have market appeal,” he said.

Extra Spending

The quarterly survey of 921 Bloomberg customers was conducted Jan. 17, less than a week after Japan’s Cabinet approved 10.3 trillion yen ($115 billion) in extra spending. Abe’s Liberal Democratic Party swept to power in elections last month on a campaign of increased fiscal and monetary stimulus. Investor optimism for Japan’s markets is the highest since the question was first asked in October 2009.

The Nikkei 225 Stock Average erased an initial advance today after the BOJ decision, falling 0.6 percent as of 1:16 p.m. in Tokyo. It has increased for 10 straight weeks through Jan. 18, the longest rally since 1987. Goldman Sachs Group Inc., Bank of America Corp. and Nomura Holdings Inc. are predicting Japanese stocks will extend gains.

The Abe administration’s determination to end deflation through coordinated action with the central bank has helped push the yen about 4.3 percent lower against the dollar since the government took office Dec. 26. The currency has weakened from the postwar record of 75.35 reached in October 2011 to as low as 90.25 yesterday.

Investors expect the government to weaken the yen to aid shipments abroad, according to 59 percent of respondents who said they were very or fairly confident in the outcome. Thirty percent said they were “just somewhat confident” and 7 percent said Japan won’t be able to do that.

Asset Purchases

Japan last had 2 percent annual inflation in 1997, when the yen sank as low as 131.59 per dollar. Prices have fallen in 10 of 15 years since, according to data compiled by Bloomberg.

There was less confidence over whether the new price goal will end deflation. Eighteen percent of investors said they were very or fairly confident in such an outcome, 50 percent said they were “just somewhat confident” and 26 percent said they were certain it wouldn’t work.

“No one expects a miracle in the short term, but at least for once someone’s got the guts to put his name on the line,” said Andy Pornprinya, managing director of regional institutional sales at UOB Kay Hian Securities (Thailand) Pcl in Bangkok and a survey participant. “The perception is Abe will do whatever it takes as this attitude has proven to work well” for both the Federal Reserve and European Central Bank.

Island Dispute

A territorial dispute with China over eight uninhabited islands in the East China Sea has prolonged Japan’s recession and hurt a trade relationship of more than $300 billion.

If tensions between the two nations deepened to the point of sustained Chinese boycotts of Japanese goods and curtailed Japanese investment in China, 67 percent of poll respondents said that would damage the global economy without tipping it into recession. Six percent said it could trigger another downturn, while 25 percent saw little or no impact on the world economy.

The survey showed people remained more confident in prospects for China’s markets than Japan’s. Respondents who see the largest Asian economy as having the best opportunities over the next year rose to 31 percent from November’s 27 percent. That’s second globally to the U.S.’s 38 percent.

Investors who see China’s economy improving rose to 32 percent from November’s 28 percent, the highest it has been since Bloomberg began asking the question.

The poll of Bloomberg customers was conducted by Selzer & Co., a Des Moines, Iowa-based company. The survey has a margin of error of plus or minus 3.2 percentage points.

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