With the dust settling on the Bank of Japan's (BOJ) surprise shock-and-awe easing campaign last month, analysts say the huge rally in the country's stock market could stall.
Both the Nikkei and Topix rose more than one percent in early trading Wednesday to 17,326 and 1,389, respectively, on a media report that Prime Minister Shinzo Abe will postpone a planned sales tax increase and call a general election for December.
"This may be the last strong rally in Japan in till 2016," Societe Generale said in a note this week. While the BOJ's latest steps weakened the currency significantly -- a move strongly correlated with gains in Japan equities -- Societe Generale believes further weakness in the yen is likely limited.
The U.S. dollar is fetching around 115.83 yen, after touching 116 yen Tuesday. Dollar-yen has surged 6 percent since the end of October, when the BOJ expanded its massive asset buying plan first deployed last April in a bid to achieve a 2 percent inflation target by next year.
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"We see the current competitive devaluation of the yen as more of an end to a process which started in 2011 at 75 and may end up at 120 (down 38 percent in total, another 4 percent potentially) than the start of another 50 percent or so down-leg," it said. "We thus see the current Japan currency and equity market scenario as a short-term tactical move, rather than a long-term structural trend."