The Japanese government has announced a £72bn stimulus package designed to boost the size of its economy by 2% and create an additional 600,000 jobs.
This money will be spent on infrastructure development as well as providing incentives to business to invest.
Japan was certainly in need of some economic stimulus.
Investors in Japanese equities have been frustrated by a decade of stagnation. The IMA Japan sector average has returned just 5.44% to investors over the past five years.
The Japanese economy has been struggling of late as a result of falling global demand for exports, as well as weaker domestic consumption.
A strong Yen has also hampered its export potential, making goods too expensive for overseas buyers.
Shares in Japanese companies have responded well to the announcement. The Nikkei 225 index is up by around 1.4% as a result of the news.
Whilst these measures should deliver a short term boost to Japanese equities, our House View is to remain underweight for this asset class.
We expected this round of stimulus measures when we wrote our latest Investment Outlook report this week, although still do not believe it will make Japan a sufficiently attractive proposition for equity investors in 2013.
Photo credit: Mark Veraat
