Japanese Equities

CHAPTER 6September 2017–December 2018

As stated in the introductory chapter, much of the contents of this book is based on what I learned as an equity derivatives strategist specialized in the Japanese equity market. Needless to say, the market has continued to move since my retirement in August 2017, possibly providing us with an opportunity to examine the validity of many of the claims made and conclusions reached in the earlier chapters of this book. This chapter is dedicated to that purpose.

Backdrop

The Japanese equity market from September 2017 to December 2018 may be characterized by the effect of politics, internal and external, and interest rates, perhaps more so than most other years. Internally, PM Abe was saddled with the accusations of political favoritism said to be bestowed upon his “personal friends” (these incidents are known as the Moritomo and Kakei Gakuen scandals in Japan). Because of these accusations, in 2017 and 2018 his approval ratings dropped to the lowest level since he took office, according to multiple opinion surveys.

External politics played a major role because of North Korea, China, and Trump administration policies, though not, of course, in a mutually exclusive way.

As significant a threat to US security as North Korea was, the threat early in Donald Trump's presidency was more immediate to Japan than to the US due to the obvious geographical proximity of North Korea to Japan. Had the US and North Korea continued to escalate their threatening ...