TOKYO, Nov 29 (Reuters): Japan's Nikkei 225 share average will rally to the psychological 30,000 level by the middle of next year for the first time since September 2021, according to analysts in a Reuters poll.
Investors see inflation peaking in the United States and elsewhere, which could cause governments to loosen monetary policy. Lower interest rates or higher economic growth would improve the outlook for Japanese corporate profits.
However, risks to the outlook include the extent of the global economic slowdown and China's renewed COVID clampdowns, which are resulting in social unrest.
The median estimate of 11 analysts polled Nov. 14-28 was for the Nikkei to be at 30,000 at end-June, although that represents a medium-term plateau, with the poll putting it at that level at the end of next year as well.
That would be a 6 per cent advance from Friday's close of 28,283.03. The Nikkei's high for this year was in January, when it touched 29,388.16.
Japan's stock benchmark has retreated after hitting a 10-week high of 28,502.29 on Thursday amid growing optimism US inflation may be peaking and the Fed would shift to a more dovish stance as soon as next month.
T&D Asset Management gives a representative view, with forecasts for the Nikkei to reach 30,500 in June before rising to 30,700 in December, and then 31,000 by mid-2024.
"We are heading toward the demise of the restrictive financial environment that resulted from the Fed's hawkish turn, although the market ultimately wants to hear confirmation of that from the meeting in December," said Hiroshi Namioka, a Tokyo-based chief strategist and fund manager at the firm.
"We also need to pay attention to the protests in China, so the next three months is probably time to adopt a wait-and-see approach."
There was a split over the outlook for Japanese firms' financial results over the next six months though, with four analysts expecting an improvement and three predicting a deterioration.
Many said Japanese stocks would need to take another leg lower sometime in the first half of next year before rallying.
That includes Nomura, the country's biggest brokerage, which forecasts the Nikkei will be little changed at 28,000 in June before reaching 30,000 at the end of the year.
"What will be very interesting next year is the counterintuitive combination of yen appreciation and a steady, positive performance in the Nikkei," said Yunosuke Ikeda, Nomura's Tokyo-based chief equity strategist, pointing to the market impact of a peak in Fed interest rates.
"That means for dollar-based investors, Japanese equities will be very attractive."
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