Kevin Buckland

TOKYO (Reuters). The Tokyo share index is on a rollercoaster ride this year. Analysts in a Reuters poll predict that it will climb to over 7% and 29,000 at the end 2022. That’s a record high since the beginning of January.

Japan’s stocks closely tracked Wall Street’s fortunes as fears about inflation in the United States and whether efforts by the Federal Reserve to reduce it could smother growth have weighed on them.

The benchmark index trades at just over 27,000 and has been consolidating since rebounding from a low of 24,681.74 in March, which was a 16 month ago. The benchmark index reached a new post-1980s-Bubble peak of 30,795.78 last September.

Analysts believe that it is unlikely to get worse. Every respondent sees the dip in equities ending within six months. Some say it has already ended.

The median forecast was that Nikkei will rise to 29,000 year-end. This includes a forecast from Nomura, SMBC Nikko Securities of a forecast of 31,000 and a minimum prediction of 26,500 NORD/LB.

Dai-ichi Life Research Institute is conservative. They predict a 500-point rise to 27,500, as Japan learns how to live with COVID-19.

Koichi Fujishiro, senior economist at Dai-Ichi Life, stated that although Japan’s economic reopening is slower than in the U.S. or Europe, there are upside risks to Japanese stocks which makes them attractive as an investment.

He’s one of the four respondent who expect stock volatility to slowly decline in the following months.

By contrast, T&D Asset Management – which expects the Nikkei to end the year at 28,800 – expects volatility to drop significantly.

Hiroshi Nakioka is a chief strategist and fund manager at the firm. “The perception that Japanese stocks have been cheap already has grown, and people are looking again at Japanese politics and policies. So stocks will rally,” he said.

Societe Generale, (OTC:) predicts an increase in volatility. Amemiya Soken’s Kyoko Amemiya expects it to rise significantly. She says that although the Nikkei trades in a large box, between 25,000-31,000.

A further question was answered by five of the seven respondents who said that value stocks would outperform.

“U.S. real yields are still low, and will rise further, acting as a weight on U.S. high tech stocks for a little longer,” said T&D’s Namioka.

Growth stocks will have trouble in Japan, too, due to the U.S. market influence.”