Equities: Are TOPIX and Nikkei Still Cheap?

Three months ago, we discussed the impact of Abenomics on Japan’s economy.   Japan’s economy, generally speaking, has been doing well.  While there is plenty to quibble about, since Prime Minister Shinzō Abe assumed power in late 2012 Japan has had its best sustained growth since the 1980s.  Unemployment fell to its lowest level since the early 1990s and inflation turned slightly positive.  Not everything is coming up roses: the government still runs a substantial deficit although its smaller than before, and while debt levels remain colossal, they have stabilized.

Not surprisingly, Japan’s two main equity indices, the TOPIX and the Nikkei, turned in a stellar performance.  Since Abe took office in late 2012, the TOPIX returned 180% while the Nikkei returned 195%.  By way of comparison, the S&P 500® returned 110% over the same period of time.