Thomson Reuters
The outlook was based on the expectation of a weaker yen adding to Japanese company earnings. The Bank of Japan is expected to increase monetary stimulus to keep JGB yields at zero (as investors move towards USTs), thus driving the yen lower.
"Yen weakness tends to drive Japanese equity outperformance in local currency terms, with each 10% off the yen adding c. 15% to EPS, on the basis of a simple correlation," Credit Suisse analyst Andrew Garthwaite said in a research note on Wednesday.
Another positive is that selling by foreign investors has slowed. Credit Suisse is confident that stocks could rise once foreigners become net buyers as historically, "when sentiment among foreign investors does change toward Japan, it has tended to be extremely impactful."
The firm also sees Japanese equities as undervalued in the global context. "Japan trades on a 5% forward PE discount to European equities, and a 20% discount to the US," it noted.