By all indications, Japanese Prime Minister Shinzo Abe's economic policy agenda dubbed "Abenomics" seems to be coming back to earth.
After enjoying record highs in equity capital funds in April and May with net inflows of US $12.5 billion, the figures dropped significantly to just US $1.7 billion in June. Analysts think the June investments are not an aberration but rather a disturbing trend.
That means domestic Japanese companies will have to pick up the slack in the equity market. But it is not going to be easy because of the weakened yen, mainly because of the monetary easing policy of "Abenomics" that will supposedly benefit the export-oriented country, an idea that is supported by the large exporters themselves.
The problem, however, is that exports only make up 13.5% of the country's gross domestic product. For comparison, it is nearly similar with the euro zone and just three licks higher than the US economy's 10%.
"With hindsight, the enthusiasm for 'Abenomics' overtook what could realistically be delivered in the near term," Paul Niven, head of multi-asset investment at F&C Investments, said.
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