Sharper contraction of GDP (-7.9%) and corporate profits (-46%) in Q2. GDP expected to recover in Q3. Profit growth of +21% in 2021. Excessive valuation of the Nikkei.

Key points

• The change in prime minister will have no influence on Japan’s economic policy
• Japan’s GDP contracted more sharply than expected in Q2 2020
• The Japanese economy is already benefiting significantly from China’s recovery
• The BoJ is not expected to change its current policy in the coming weeks
• Return of trade surplus for Japan
• Dead calm interest rate markets and inflation
• Japan’s economy still in desperate need of a weaker yen
• Japanese corporate profits fell by -46%

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