The bumper run in Japanese equities - which have surged almost 40 percent over the past four months on optimism that "Abenomics" will bring an end to two decades of deflation – is just getting started, according to investment strategists, who expect larger gains ahead.
According to Ed Rogers, CEO of Tokyo-based hedge-fund adviser, Rogers Investment Advisors, the benchmark Nikkei 225 will hit 20,000-25,000 in the next two to three years – levels not seen since April 2000. This means a jump of 60 percent to 100 percent from current levels.
The highest-ever level for the index - 38,957.44 - was hit in December 1989, before the country's so-called lost decades which began with a stock market crash in 1990.
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"This [Abenomics] is for real – take it seriously – for the first time every information source that I have in Japan, after living there for 26 years, is in agreement. The Japanese, this is their defining moment. If they are going to save themselves from obscurity and failure, this is the time," Rogers told CNBC, referring to Prime Minster Shinzo Abe's push for aggressive monetary easing to beat deflation and drive growth in the economy.
"Since the earthquake in 2011, I don't think people externally understand the amount of soul searching that has gone on in Japan trying to figure out how to solve these problems of 20 years of deflation," Rogers added.
Strategists including Ron Napier, head of Napier Investment Advisors, said while the "easy money has been made," there are further gains in store for the market, forecasting 40 percent upside for Japan stocks by next summer.
Continued weakness in the Japanese currency is central to Napier's call on the Japan stocks. He expects the dollar-yen will hit 100 as soon as next month, spurred by announcements of further monetary easing at the Bank of Japan's (BOJ) policy meetings in April, and continue to weaken thereafter.