Despite the impressive gains delivered by Japanese equities since October 2012 (the market has gained 29% in absolute terms) and the fact that the rally shows no signs of abating, the reaction of many investors and commentators has been one of caution.
“We’ve been here before” and “It won’t last” certainly typify the responses we have heard most often. Such scepticism is understandable: since the long-term peak of the market over two decades ago, there have been numerous false dawns (see chart 2). It is a well-known saying in the investment community that Japanese equities should be occasionally rented, but never owned. Do we have any reason to believe that “this time is different”?
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