Allianz: The Japanese stock market will withstand the shock of geopolitics and yen Fluctuation

Tensions and Exchange Rate Fluctuation in the Middle East have led to a weakening of Japan's record stock market pump, but the weakness appears to be temporary, supported by solid corporate fundamentals and a long-term AI outlook. That's the view of Koji Nakatsuka, chief investment officer at Allianz Japan's equity division, which manages $2.4 trillion in global assets. "If everything returns to normal, there is upside potential for Japanese equities by the end of the year. The Nikkei could return to record highs by the end of the year," he said. In addition, Nakatsuka said that the yen is likely to fall to the 155-158 range, but "most market participants have already expected the government to intervene in the market, so it will be difficult to continue to buy the dollar, shorting yen." Small-cap stocks that have benefited from the yen's appreciation will start to catch up with the larger-caps that have led the pump over the past year.