The Bank of Japan and US Federal Reserve face policy meetings where both could raise rates. Japanese companies are likely to fare better than US counterparts due to different economic narratives. US markets sank after strong jobs data, suggesting the Fed can tighten policy. Meanwhile, Japanese stocks have outperformed in local currency and dollar terms, boosted by the weak yen.

For Japan, rate rises signal economic normalisation after decades of deflation, while US hikes feel restrictive due to high debt levels. A quarter-point rise would cut operating profits by just 0.2 percentage points, according to JPMorgan analysts. Carmakers and power utilities face bigger hits up to 1.5 percentage points, but precision components makers like Kyocera, Advantest and Murata may benefit from interest on savings.

Growth-focused investors might favor US earnings expected to rise nearly 30% this year versus Japan's under 20% per Fact Set and Nomura. However, Japan's modest valuations promise better returns than bonds. Japanese shareholders expect next year's profit at about 6% of current share prices, versus twice that yield from 10-year JGBs. US Treasuries offer 4.78% yield compared to S&P 500's earnings yield, potentially making stocks struggle to compete with bonds.