Tokyo Traders See Faster Vaccine Pace Driving Markets Higher

Japan’s vaccination effort is starting to gain adherents among investors who had once blamed it for holding the equity market back.

For months, Japanese shares have been weighed down by widespread criticism that the country’s Covid-19 vaccination program was trailing other developed nations. But as the rollout begins to inch forward, with the country administering more than 1.7 million doses in the past four days, some strategists are expecting the narrative to shift.

“It’s really gathering speed,” said Tomoichiro Kubota, a senior market analyst at Matsui Securities Co. in Tokyo, referring to the government’s program. “People have been saying it’s slow, but now it’s starting to get into full swing and you’re starting to see that reflected in the stock market.”

An uptick in the average forecast for the Topix in June may signal investors are starting to price in an expansion of vaccinations. The government on Friday formally approved the use of Moderna Inc.’s vaccine, with shipments already in the country and set to be used in large-scale vaccination centers in Tokyo and Osaka from Monday. AstraZeneca Plc’s vaccine was also approved, though officials don’t have immediate plans to use it, according to reports.

Citing the anticipated pickup in vaccinations as well as improvements in the chip situation, UBS Group AG upgraded Japan equities to “most preferred.”

“Now that supplies are rapidly increasing, we expect 20–30% of the population to have received at least one dose within the next couple of months,” analysts wrote in a note dated Thursday.

Tokyo Traders See Faster Vaccine Pace Driving Markets Higher

That’s welcome news for a market that had flirted with a technical correction amid concerns over U.S. inflation and the Bank of Japan’s near-absence from the stock market. Japan’s Nikkei 225 Stock Average is the second-worst benchmark this year among developed markets tracked by Bloomberg.

“We are beginning to see the path forward,” said Tetsuo Seshimo, a fund manager at Saison Asset Management Co. “Two weeks ago or so, it was very unclear. But once things get going, it’ll speed up -- the system is now in place.”

Still, vaccinations for professionals in Tokyo seem far off, with little indication in many areas when they might get shots. Japan has administered nearly 8 million first and second doses in a country of more than 126 million, compared with almost 60 million in the U.K., but the pace has begun to increase as more local authorities in charge of vaccinations start to spin up their programs.

Tokyo Traders See Faster Vaccine Pace Driving Markets Higher

Japanese Prime Minister Yoshihide Suga surprised many earlier this month when he gave a formidable target for the country to achieve 1 million inoculations a day, seeking to finish administering doses to the country’s 36 million over-65s by the end of July. While around 86% of municipalities have said they expect to finish by that date, it’s unclear if the pace, which per capita would match some of the best days in the U.S., is realistic.

But the stock market’s mood has definitely changed for investors like Naoki Fujiwara, the chief fund manager at of Shinkin Asset Management in Tokyo.

“It’s starting to feel real, whereas just a few days ago I was wondering when it would begin,” said Fujiwara, who expects the Moderna approval to support the market. “Should vaccination expand in the next month or so, Japanese stocks could rebound strongly again.”

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