We are optimistic on the one-year outlook for Japanese stocks. We believe that Prime Minister Abe's goal of reinvigorating economic growth by ending two decades of deflation will continue to drive Japanese stocks higher. We have been pleasantly surprised by the speed and magnitude at which the markets have anticipated the success of his policies so far. The Nikkei 255 Japanese stock index almost doubled from its November low to its recent high, and the yen has depreciated by more than 25% versus the dollar. Abe's 'three arrow' strategy of (1) quantitative easing (to reverse deflation and weaken the yen); (2) fiscal stimulus (to promote investment and growth); (3) structural reforms (to increase competitiveness and sustain corporate profit expansion) is one of the most aggressive experiments in policymaking by any major economy, and its outcomes can only be estimated. Just as we are optimists, there are plenty of sceptics.

David Fuller's view I agree and Japan's recent correction is in proportion to the explosive upside move (weekly & daily) is giving many investors a second chance to invest for the medium to longer-term recovery without having to chase a runaway uptrend. Japan is short-term oversold after three weeks to the downside and now much closer to its rising 200-day MA.