Japan's Nikkei is the world's best performing major equity market this year and is tipped to head higher on yen weakness. So, at what point is it time to exit from the stock-market trade of the year?
The answer is when inflation hits the Bank of Japan's 2 percent target, says Harmen Overdijk, the head of portfolio management at EFG International, a private banking group.
Japan's core consumer prices, which exclude food, stopped falling in May and data due out on Thursday is expected to show they rose 0.3 percent in June from a year earlier, according to a Reuters poll.
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"The government will do anything to push inflation higher and I am convinced that they will succeed this time. This will lead to a weaker yen and to higher equity prices," said Overdijk, who expects the Nikkei to rally towards 18,000 to 21,000 over the next 12 to 18 months, implying a gain of at least 23 percent from current levels.
"However, there is no long-term plan to deal with structural challenges like the ageing population, low productivity and huge relative debt position," he added.
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"The day the government announces they have 2 percent inflation, market sentiment will be very positive, but that will be the time to sell all your Japanese assets," said Overdijk, whose firm is long Japanese stocks and REITs.