In a notable development, Bank of Japan (“BOJ”) abstained from injecting further monetary stimulus, keeping the benchmark rate unchanged at negative 0.1%. The apex bank also refrained from expanding its asset-purchase program.
It was late in Jan 2016 when the BOJ took the unorthodox step to impose negative rates so as to give an impetus to the ailing economy. Unlike the usual scenario wherein the rate of interest prevails in the positive territory, in a negative rate situation, banks have to pay the central bank for parking deposits. Borrowing from the banks not only aids the borrowers to meet their requirements but also fetches interest payments. So logically, a negative interest rate situation is likely to result in abundant liquidity in the market, which in turn is expected to spur demand and lead to economic growth.
However, since the inception of the negative rate strategy in late January, the Japanese economy hasn’t grown as desired. In fact, the economy is anticipated to grow at a very slow pace during first-quarter 2016. Added to that, real wages are moving southward and no appreciable rise is expected this year. The inflation rate still shows fragile growth while household inflation rate is anticipated to move down.
BOJ has blamed the slowdown in the emerging economies for the slump in production and exports, which in turn had a negative impact on the overall economy. However, the bank also hinted that going forward it might have to lower the rate again in order to meet its inflation target of 2%.
Searching for Best Japanese Stocks
Given the unconventional monetary policy that the BOJ is following, investors are skeptical about picking Japanese stocks. However, sectors which are heavily dependent upon borrowing are expected to perform well in this situation. On the other hand, the banking business, which receives deposits and uses the deposits for lending purposes, is likely to be severely affected.
Nevertheless, we’ve tried to nail the 3 best Japanese stocks which hold a Zacks Rank # 1 (Strong Buy) or 2 (Buy) along with a positive current year percentage change in estimates (4 weeks). Added to these, we have taken those stocks with a VGM score of either ‘A’ or ‘B,’ with the help of our style score system. Here, V stands for Value, G for Growth and M for Momentum and the VGM score is the weighted average of these scores.
ANA Holdings Inc. ALNPY – With a market capitalization of $10.3 billion, this Tokyo-based airline transportation company is engaged in offering air passenger and air courier services. It is also involved in the business of buying, selling, leasing and maintenance of aircraft and aircraft parts.
Zacks Rank #2
VGM Score: ‘A’
% Change in F1 Est. (4 wks): 13.33
Projected EPS (F1): 142.86%
Marubeni Corp. MARUY – Based in Tokyo, the company is engaged in diversified operations such as purchase, distribution, and marketing of various industrial and consumer goods across the globe. Marubeni has a market capitalization of $9.5 billion.
Zacks Rank #2
VGM Score: ‘A’
% Change in F1 Est. (4 wks): 0.48
Projected EPS (F1): 104.13%
NTT DOCOMO, Inc. DCM – With a market capitalization of $89.3 billion, this Tokyo-based mobile communications company is engaged in providing a wide variety of leading-edge mobile multimedia services.
Zacks Rank #2
VGM Score: ‘B’
% Change in F1 Est. (4 wks): 5.31
Projected EPS (F1): 104.13%: 40.00%
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ANA HOLDINGS (ALNPY): Free Stock Analysis Report
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