The Nikkei has got the new week off to a good start today (March 24th) by recording a solid gain to recover from the six-week low reached by the index last week.
Friday had been a public holiday for the Japanese stock markets, but the index opened strongly this morning and ended the session 1.8 per cent up on the start of the day.
But the Nikkei is still down by more than ten per cent on the turn of the year, with the index losing some of the strong gains it picked up over the course of 2013. The Nikkei had comfortably outperformed global rivals such as the Dow Jones, the FTSE 100 and the S&P 500 last year.
Speaking to Reuters, Masatoshi Kikuchi, pan-Asian chief equity strategist at Mizuho Securities, stated that spring has not yet arrived for the Japanese index.
He said: "It'll be difficult for the Nikkei to rise to 16,000 by the fiscal year-end but I still expect the benchmark will reach 16,500 yen by the end of June, buoyed by the prime minister's growth strategy due in June and solid corporate earnings."
Markets around the world were spooked last week by comments made by the new head of the US Federal Reserve Janet Yellen, who took over the role from Ben Bernanke last year. Ms Yellen, who was US leader Barack Obama's preferred candidate for the position, said interest rates could be increased as soon as next year.
Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo, suggested that one of the reasons for the underperformance of the Nikkei in 2014 so far is investors are worried about the potential impact of an impending sales tax rise, which is due to come into effect from April 1st.
He said: "Market participants need to recalibrate, particularly when there is a such intense uncertainty over the direction of the Japanese market towards the end of fiscal year."
Learn about the Asian markets and CFD trading at City Index
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.