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Allianz says Japanese stocks will defy geopolitics and yen volatility

Middle East tensions and currency volatility have caused Japanese stocks’ record rally to falter, but the weakness appears temporary as solid business fundamentals and the long-term prospects for artificial intelligence provide support.

That’s the view of Koji Nakatsuka, chief investment officer for Japanese equities at Allianz Global Investors, which manages $2.4 trillion in assets worldwide. “If everything normalizes, the Japanese stock market has upside potential by the end of the year. The Nikkei could return to its record highs by the end of the year,” he said.

Japanese shares have come close to a technical correction after surging to record highs earlier this year as traders scaled back their bets on Federal Reserve rate cuts. That renewed the dollar’s strength and put pressure on the yen, which has weakened against the dollar to almost ¥155. It is a level that has raised concerns about possible intervention by authorities and prompted warnings from Wall Street brokers, at a time when rising geopolitical tension is prompting a flight to safety.

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