Japanese shares have gotten off to a rocky start this year, but the market's bulls remain undeterred, expecting solid gains.
After last year's near 60 percent rise, the Nikkei has fallen around 4 percent so far in January and data from Japan's Ministry of Finance show foreigners sold a net 219.1 billion yen ($2.1 billion) worth of Japanese stocks in the week ending January 11, confounding a broadly positive consensus call on the market.
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"Obviously, we had an extremely good year last year," said Nicholas Smith, Japan strategist at CLSA. "So there will be a certain amount of profit taking. But there's no reason to start getting queasy on the bottom rung of the stepladder. This is the start of a recovery for Japan," he told CNBC.
"This country is probably the most highly geared to global growth," Smith said, noting global PMI data in December were the highest in 33 months.
In addition, "they're brutally competitive with a lot of operational gearing," he said, noting that many companies have cut costs so much they can break-even even if the dollar weakens to around 84 yen, compared with current levels around 104-105 yen.