Japan stock market under state emergency

[genkidesu]

Hey everyone, I'm new to investing and started reading and learning 2-3 weeks back (Quite overwhelming!).

Question: Why the Japan stock market (Nikkei 225) is going up despite the state emergency come into effect?
I'd imagine state emergency means many retail, restaurants and transportation companies will suffer loss (unfortunately ), but I don't quite understand the market is still moving up.

I'm interested in buying an amount of eMaxis Slim Japan ETF as I'm staying in Japan for a while. Just wanted to understand if it is not a good time to enter when an economic decline is expected.

Sorry if it is an obvious question, but I guess this is a safe zone for noob questions right

[Kanto]

Hey everyone, I'm new to investing and started reading and learning 2-3 weeks back (Quite overwhelming!).

Question: Why the Japan stock market (Nikkei 225) is going up despite the state emergency come into effect?
I'd imagine state emergency means many retail, restaurants and transportation companies will suffer loss (unfortunately ), but I don't quite understand the market is still moving up.

I'm interested in buying an amount of eMaxis Slim Japan ETF as I'm staying in Japan for a while. Just wanted to understand if it is not a good time to enter when an economic decline is expected.

Sorry if it is an obvious question, but I guess this is a safe zone for noob questions right

The Stock market is not necessarily reflective of the economy as a whole. The Nikkei represents the largest Japanese companies.

Stock prices are also not necessarily (especially recently) reflective of the companies financial health or earnings.

A stock is worth what people will pay for it.


......


Two cases studies:

Nikola motors - The company has not sold a single-vehicle. Their income last year was $37,000. Stock price? -> $17.82 a share

Tesla - Has a P/B Ration of 48.26.

......

Do not wait to enter the market. Buy for the long term and hold.

Buy diversified Index funds.

Do not put all your money in Japan. They only represent around 8% of the global economy.

I would recommend Emaxis Slim All Country or Emaxis Slim Developed Country

[RetireJapan]

I don't quite understand the market is still moving up.

Welcome to the forum!

No one knows what the stock market will do in the short term. People are good at making up reasons to explain things after the fact, but it is impossible to predict in advance.

Right now big companies might be doing well, governments around the world are paying money out to try to keep the economy moving, etc.

I think Kanto's advice is good. Start now, start with small amounts of money so you can learn as you do without getting too nervous, buy cheap diversified index funds (mutual funds, or 投資信託, are a good option in Japan) and keep asking questions here

[mule96]

Not only Japan, but other marlets boom as well. I am also confused
This article also tries to find an explanation:
https://www.nytimes.com/2021/01/01/upsh ... -2020.html

[mighty58]

Two major reasons:
1. the Bank of Japan buys the market (via ETF's) every day in order to prop it up. This is called quantitiative easing and artificially inflates stock prices for political purposes. See: https://www.japantimes.co.jp/news/2020/ ... ock-owner/

2. bond yields are so low that investors almost have no alternative but to buy shares in the market, which again drives demand, and with all that money sploshing about, there is a lot of speculation happening, and valuations (stock prices) get further and further away from what they should be based on the fundamentals.

[adamu]

My simple (naive?) way of looking at it: We will never understand why the market does what it does. The market is the result of the actions of millions of people - it's beyond the comprehension of a single individual. But in the long run it goes up. As long as we invest for the long run regardless of current events, it'll eventually work out.

Or... it won't. So it's important to live life at the same time, in case it was all for nothing. That's why I'm not doing FIRE, but I am saving the majority of my income.

[fools_gold]

This feels a lot like the end of 2017 and early 2018. Back then stocks and bitcoin were both melting up too...

[genkidesu]

Wow, thank you for the replies!

Right, so it seems there are so many factors that influence the stock market in the short term that it's impossible to predict what will happen.

I'll follow the advice here and from the books to invest for the long term with diverse index funds then

[taneandy]

Another thing to keep in mind is that the effect of Tokyo, etc. being under a state of emergency will already have been priced into the market.
It was pretty obvious even a couple of weeks ago that restrictions in Tokyo would have to be toughened, and most people could have predicted several months ago that Japan would have another rise in cases over the winter.
In contrast, the markets rose quite suddenly when some of the vaccine trial results were announced because the effectiveness of the vaccines was much higher than people had been anticipating.

[AreTheyTheLemmings?]

I think one factor is the tidal wave of money governments have unleashed as part of their quantitative easing policies in reaction to various crises over the past decade or so (the GFC, Covid-19, etc.). All that cash has to go somewhere, so a lot of it ends up in stock markets where it keeps prices afloat despite whatever carnage is happening at the time.