GF Securities: How did the Japanese stock market reach a new high? How should we interpret the "Japanese special valuation"?

According to the Zhitong Finance and Economics APP, GF SEC released a research report pointing out that the Japanese stock market is expected to be among the top-performing global mainstream stock markets in 2023-2024, mainly benefiting from three major enhanced marginal changes: (1) Japan's victory over deflation, with rising prices driving nominal profit growth for companies; (2) the further devaluation of the yen driven by differences in monetary policy orientation, which helps boost Japanese exports and enhance the attractiveness of the stock market; (3) the Tokyo Stock Exchange frequently introducing policies to improve corporate governance, with the "Nikkei Special Valuation" driving further improvement in corporate profitability.GF SEC believes that in many important moments, the "positioning" of the big cycle often dominates most of the investment returns. In tracing the history of overseas markets, the issue of long debt cycles is a common memory behind the major downturns overseas.How did the Japanese stock market reach a historical high?From 1995 to 2005, Japan experienced a long debt cycle, with a decline in confidence in the household sector. The financial crisis further suppressed Japan's economic performance. With the introduction of Abenomics at the end of 2012, the key to Japan's stock market enjoying a ten-year bull market was successfully breaking out of the deflationary debt cycle through loose monetary policy and substantial government spending, gradually reducing the leverage ratio of Japan's non-government sector.In addition, Japanese overseas companies adapted their structures to changes in economic growth logic, with the performance and profitability of overseas companies continuing to grow, driving index performance upwards. In terms of policies, the long-term loose monetary and fiscal policies of Abenomics, as well as regulatory improvements in corporate governance by Japanese regulatory authorities, have provided long-term support for the Japanese stock market.What is different about the recent high in the Japanese stock market?GF SEC points out that the performance of the Japanese stock market in 2023-2024 is expected to be among the top global mainstream stock markets. Mainly benefiting from three major enhanced marginal changes: (1) Japan's victory over deflation, with rising prices driving nominal profit growth for companies; (2) the further devaluation of the yen driven by differences in monetary policy orientation, which helps boost Japanese exports and enhance the attractiveness of the stock market; (3) the Tokyo Stock Exchange frequently introducing policies to improve corporate governance, with the "Nikkei Special Valuation" driving further improvement in corporate profitability. Global funds, following the deepening of deglobalization after the Russia-Ukraine conflict in 2022, are pursuing assets with certainty premiums in the "new investment paradigm," making "Nikkei Special Valuation" the trend of global fund allocation, which will also guide the gradual consensus on "China Special Valuation" in the A-share market.Lessons from Japan's exit from the debt cycle and industrial overseas expansionFirst, emphasize steady wage growth to stimulate consumer demand, accelerate the improvement of industrial structure; and refine the direction of government fiscal spending to weaken the willingness to save uncertainty, stimulate endogenous economic momentum. Second, from the transformation of characteristics of Japanese companies going overseas, focus on the transformation of industrial structure, encourage high-end manufacturing to go overseas, enhance overseas investment by companies; seek comparative advantages from the engineer dividend, improve asset misalignment issues while enhancing the growth space of companies through export investment.Risk Warning: Historical experience does not represent the future, differences in national conditions, overseas review experience does not equate to domestic, economic performance falling short of expectations, etc