Sumitomo Mitsui DS Asset Management
The latest research and outlooks in the ProAllocate library
- Macro
The BOJ’s rate hikes and their impact on Japanese firms
SMDAM projects the BOJ will raise rates to 1.75% by mid-2027, but argues corporate Japan's strengthened balance sheets and profitability exceeding borrowing costs will cushion the impact. The firm's simulations suggest interest expense increases remain manageable relative to profit growth.
- Equities
Higher oil, higher rates, higher markets? Japanese equities set against rising rates and crude prices
Despite the Nikkei 225 stalling near record highs amid surging crude oil prices and rising Japanese bond yields, underlying sector, style and size rotation favours value, small-caps, domestic demand and high dividends over growth and exporters.
- Fixed Income
Japan’s bond yield surge nears 3%: What’s driving it and where does it go next?
SMDAM says Japan's 10-year JGB yield, near 30-year highs around 2.9%, is likely to breach 3% as fiscal concerns and oil prices outweigh already-priced BOJ tightening. It argues credible fiscal discipline, not further rate-hike expectations, will determine whether the rise stays orderly.
- Equities
Japan’s corporate reform agenda building to a crescendo
SMDAM argues Japan's investment case is shifting from a governance-reform story to one of structural earnings growth, citing record buybacks, M&A and shareholder activism, while flagging yen weakness as the key risk despite strong foreign inflows.
- Macro
Why the weaker yen could keep driving equity gains
SMDAM argues Japan's real yen remains deeply undervalued and structurally likely to stay weak, meaning any correction will come via rising Japanese inflation rather than currency appreciation. This inflation dynamic, combined with Japanese firms' overseas earnings exposure, supports continued equity gains in both yen and dollar terms.
- Equities
Markets rally on prospects of greater domestic investment
Finance Minister Katayama's call to encourage domestic investment triggered a triple rally in Japanese equities, bonds and the yen. However, GPIF's fiduciary mandate constrains major allocation shifts, and sustained JGB demand ultimately depends on confidence in Japan's fiscal management.
- Currencies
Is the wait over for a yen catalyst?
SMDAM argues Japan's structural yen weakness stems from capital outflows and a declining auto trade surplus, but a July 10 government push to raise household and pension allocations to domestic assets could mark a turning point for the currency.
- Equities
To infinity and beyond? Life at or above 70,000 for the Nikkei
SMDAM raises its year-end Nikkei forecast to around 72,000 (upper range above 74,900), arguing Japanese equities can sustain gains on moderate valuations, solid corporate earnings, wage growth and governance reforms, with markets pricing in an eventual Middle East de-escalation.
- Currencies
A new risk of yen depreciation?
The piece argues yen weakness is becoming structural, driven by capital outflows, energy import costs and trade dynamics. It highlights a new risk: contracting domestic auto production and exports from EV competition, labour shortages and offshoring, eroding trade-surplus support and productivity, reinforcing long-term yen depreciation.