Japanese stocks are hovering at fresh seven-year highs as investors ignored a sovereign debt ratings downgrade by Moody’s to focus on a slumping yen, but analysts say further upside could be limited as markets gear up for the national elections in two weeks.
According to Kenji Shiomura, Daiwa’s senior equity strategist, a poor attendance by voters could knock the wind out of Nikkei’s rally as investors see it as a sign that voters aren’t backing Prime Minister Shinzo Abe’s economic policies.
“I don’t see any major upside – turnout is expected to be at a historical low, and the markets will take that as a sign that voters aren’t convinced about Abe’s economic policies,” said Kenji Shiomura, Daiwa’s senior equity strategist. Still, Shiomura is forecasting the Nikkei will end the year at around 18,500.
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