Financial Services Association, July 25 (Editor: Huang Junzhi) Although Japanese stocks were dragged by overnight US stocks and plummeted on Thursday, many investors are still optimistic about the medium-term trend. BlackRock Inc. (BlackRock Inc.), the world's largest asset management company, believes that in order to boost the Japanese stock market, the Bank of Japan (Bank of Japan) may keep interest rates unchanged for a longer period of time. Looking at the medium term, the company is very optimistic about the Japanese stock market.

Yuichi Chiguchi, chief investment strategist at BlackRock's Japanese subsidiary, said that although investors should be wary of the risk of changes at any of the Bank of Japan meetings this year, the Bank of Japan may need to wait until the price trend is clear at the end of 2024 before taking action. This indicates that the Tokyo Stock Exchange Index (TOPIX) may reach a new all-time high this year.

“We expect Japan's relaxed environment to continue, which provides favorable conditions for businesses and boosts the stock market while real interest rates remain negative.” he said in an interview.

Investors in the Japanese stock market, bonds, and yen were all nervous before the Bank of Japan announced its latest policy decision on July 31, and the market generally expected the Bank of Japan to cut its bond purchase plan. According to people familiar with the matter, although weak consumer spending complicates the decision on whether to raise interest rates again next week's interest rate meeting, people are still focused on interest rates.

BlackRock Investment Institute (BlackRock Investment Institute) stated in its mid-year outlook report that the recovery of the Japanese economy and rising inflation “made the stock market one of our most determined and optimistic markets.”

This optimistic view was also supported by Goldman Sachs Group, which recently raised earnings expectations for the TSE Index. Furthermore, HSBC Holdings is increasing its holdings in Japanese stocks and is showing that it is optimistic about the Japanese stock market.

This is in stark contrast to the views of Schroder Investment Management. Last month, the company downgraded Japan's stock rating to neutral, as the positive impact of the weakening yen on the stock market began to weaken, while consumer and small business confidence showed signs of deterioration due to rising import costs.

However, BlackRock's Chiguchi believes that the Japanese stock market still has more room to rise because the Bank of Japan may take a cautious approach to policy normalization. He further explained that the Bank of Japan will extend electricity and natural gas subsidies for a few more months, which will put downward pressure on prices and make it difficult for the central bank to measure inflation trends.

Even so, he pointed out that the Bank of Japan is likely to take some kind of action at every meeting. This month, the Bank of Japan met with participants in the bond market and formulated a plan to reduce debt purchases.

Finally, Chiguchi said that among Japanese stocks, companies in the tech industry are attractive because they are well-positioned to benefit from the expansion of artificial intelligence, an aging society, decarbonization efforts, and the geopolitical situation. This will include semiconductor-related stocks, the strategist said.