Corporate Japan must work harder for investors or risk derailing a record stock market boom as bonds become more attractive, the head of its largest trading house has warned. Mitsubishi Corporation chief executive Katsuya Nakanishi said that both his company and the wider market needed to deploy cash more efficiently — either by investing in future growth or returning it to shareholders.
His warning comes as the Nikkei 255 stock market index has doubled in 18 months, but investors are also being lured by bond yields hitting a 31-year high. “We’re changing from a zero interest rate era to a positive interest rate era. The 10-year government bond is 3 per cent, so it’s a choice of buying bonds or equities,” he told the FT.
The comments underline concerns that bond market turbulence, partly driven by Prime Minister Sanae Takaichi’s spending plans, could end the Nikkei 225’s bull run. Strategists have warned that Japanese equities could feel the blowback from rising bond yields. Shusuke Yamada, chief Japan foreign exchange and rates strategist at Bank of America, said a “meaningful correction” could occur if rates rose above 3.5 per cent.
Mitsubishi’s return on equity is forecast to reach 11.5 per cent this financial year, up from 8.5 per cent. It is targeting more than 12 per cent on ¥1.2tn ($7.5bn) of net income by next year. Steps include reviewing 160 underperforming businesses and a ¥1tn ($6.3bn) share buyback. Nakanishi also cited using insights from salmon farming to inform LNG trading, and deploying Lawson’s loyalty systems to Eneco.
Source: Financial Times Markets · Summarized by HeadlinesBriefing