After powering ahead 142% from early 2013 to end 2015, Japan's Nikkei 225 index gave back 29% in less than a year. Now it has whipsawed again, surging 14% in just a few days.
The large profits reported by Japanese companies between 2013 and 2015 may have dazzled investors (see left-hand chart below), but they were merely driven by yen depreciation (see right-hand chart below). Beyond this artifice, many economists wonder whether Japan will ever get back on the road to real expansion, that kind that can generate organic earnings growth. The Tokyo stockmarket is caught between this widespread scepticism and the desire to cash in on the yen's depreciation.
Investors were hoping the government would announce a supplementary budget to fund reconstruction in the earthquake-shattered areas of the south. On Sunday these hopes were answered: the Prime Minister, Shinzo Abe, asked MPs to increase public spending in the new fiscal year that began on 1 April. This week investors are now counting on the Bank of Japan (BoJ), whose monetary policy committee will meet on Thursday, to do its bit. The BoJ governor, Haruhiko Kuroda, could announce further easing to counterbalance the negative consequences of the tremors on economic growth and inflation.