Nikkei to post 46 percent gain this year, best since 1972

Japan's Nikkei index will gain almost 50 percent this year, marking the stock market's biggest annual rise in more than four decades, according to the latest Reuters poll of forecasters that is slightly down from the consensus of three months ago. The trim in the end-year forecast, which still reflects a 9.4 percent gain from current levels, is mainly due to a slightly stronger yen, as well as worries that the US government shutdown which is holding back global stock markets could be prolonged.
Prime Minister Shinzo Abe's ongoing push for aggressive economic stimulus, known as Abenomics, was the spark that lit a fire under the Nikkei late last year and is expected to continue supporting Tokyo markets. The Nikkei is expected to rise to 15,200 points by the end of 2013, which would mark its biggest annual percentage rise since 1972, according to the median forecast of 22 analysts polled by Reuters in the past week. That compares with Tuesday's close of 13,894.61. But the new consensus was down from the prediction in a poll taken in June that forecast the index would reach 15,700 by end-year.
Fears that the first US government shutdown in 17 years will hold back economic growth, along with nervousness over the risk that the United States might default, have weighed on global stocks and pushed the dollar close to an eight-month low. The decision by the Federal Reserve not to scale back its massive stimulus in September, as most had expected, also put pressure on the dollar, limiting further weakness in the yen.
Having lost as much as 18 percent by mid-May, the yen is currently down around 12 percent on the year, a boon for currency-sensitive exporters. "I cut my forecast for the year-end slightly because of concerns on US growth," said Yasuo Sakuma, portfolio manager at Bayview Asset Management in Tokyo. Sakuma now expects the Nikkei to reach 15,200 by year-end, down from his forecast of 16,000 in June.
"In June, I expected the US economy would recover more steadily and the yen would weaken to boost Japanese corporate earnings," he said. "Both the economy and corporate earnings are expected to pick up further ... It seems certain that many companies will raise their full-year business outlook when they report their half-year results," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
Fujito said he expected the Nikkei to rise to 16,000 by December and to 18,000 by the end of next year. By mid-2014, the Nikkei is expected to rise to 16,000, according to the poll. It is forecast to reach 17,000 by end-2014, a level not seen since October 2007.