The past week’s rate hike in Japan hammered the benchmark index the most in eight years. Despite the turmoil, some investors still have faith in the long-term outlook for the country’s stocks.
The Bank of Japan’s decision on Wednesday to raise rates to 0.25% sent a wave of volatility through the market, with the Topix jumping 1.5% on the day, only to plunge on both Thursday and Friday.
The BOJ’s move, coupled with signals from the U.S. Federal Reserve that it will cut rates, strengthened the yen. A weak currency had been a major factor in supporting the shares of Japan’s exporters. Still, as the country normalizes after years of negative interest rates, corporate pricing power and higher pay for workers will spur economic growth that will support the market, according to investors and analysts at Hang Seng Investment Management, Goldman Sachs Group and T. Rowe Price Group.