Where is the Nikkei headed?

After the Bank of Japan’s meeting earlier this week, BoJ Governor Kuroda said he has no immediate plans for additional easing. The Japanese consumption tax was raised from 5% to 8% on April 1, the first hike since 1997 when the economy fell into a recession. Higher taxes will likely reduce the effectiveness of Abenomics going forward, and many longer-term investors are starting to reduce allocations to Japan. The Nikkei, despite a 12% drop this year, remains up 65% since Abenomics began in 2012. The Abenomics experiment initially attracted investors because it was such a bold move, but if the BoJ hesitates now, expect the outflows to continue.

 

Japan’s Nikkei 225 Index

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