CNBC




 

 
Key Points

• Expert director at Monex Group Jesper Koll thinks that the Nikkei 225′s rally can continue past the 40,000 mark in the next 12 months, citing increased investor interest in Japan and supportive government policies.
• This would breach the Nikkei’s all time high of 38,195 reached in December 1989.
• However, IG’s Tony Sycamore expects the rally to falter somewhere between the 36,000 mark and the all time high, saying that much of the good news is priced in

 
Japan’s Nikkei 225 can reach 40,000 points in the next 12 months as fundamentals are “pointing in the right direction,” according to market strategist Jesper Koll.

His optimism in Japan also comes from a strong rebound in business confidence and a supportive fiscal policy.

Should the prediction come true, this would mean that the Nikkei would have breached its all-time high of 38,195 achieved on Dec 29, 1989.

At the time, Japan was in the middle of a real estate bubble. When the property market collapsed, equity and land prices also crashed, triggering a period of low economic growth in Japan that continues today.

Koll, an expert director at financial services firm Monex Group, told CNBC’s “Street Signs Asia” that in addition to investor interest, “Japanese CEOs are now using their retained earnings for the first time in 30 years to actually invest in people, to invest in the business.”

“I see no reason for why we shouldn’t be setting [a] mark above 40,000 over the next 12 months,” he said on Monday.

Japan’s central bank has maintained an ultra-loose monetary policy for more than 20 years.

Asked if his forecasts take into account the expectation that the Bank of Japan could tighten its monetary policy, Koll said that if there is no push factor for the BOJ to move on interest rates, “why should I change monetary policy just for the sake of changing monetary policy?
It makes absolutely no sense.”

He thinks that BOJ governor Kazuo Ueda is having a “watchful waiting” stance in terms of the economic data coming out of Japan.

The main thing to watch is next year’s spring wage negotiations, he said, adding it will tell if “the deflation spell is broken, and that Japanese CEOs are willing to invest in people and capital expenditure.”

Only then will the BOJ normalize interest rates, he said, but “this would not be for at least six to nine months.”