Although the stock market adjusted in early March due to the yen's appreciation and better-than-expected U.S. price indexes, it rebounded sharply in March on the expectation that the Bank of Japan's monetary policy meeting would maintain an accommodative financial environment, and on the rally in U.S. stocks following a dovish FOMC meeting. The Nikkei Stock Average rose 3.07%, reaching an all-time high following the previous month.

At the beginning of the month, value stocks were strong due to the forward-looking outlook for U.S. interest rates amid continued buying by foreign investors, and then turned downward led by banks and semiconductor-related stocks, which had risen sharply since the beginning of the year, due to the yen's appreciation and better-than-expected U.S. price indexes. In the middle of the period, a string of high responses in the spring labor offensive and caution about the BOJ lifting negative interest rates were selling factors, but both the BOJ and the FOMC made a significant rebound on optimism about the economic outlook as the monetary policy meeting was dovish in tone. Toward the end of the session, the index fell slightly due to the spread of caution about government and BOJ intervention in response to the sharp depreciation of the yen and the push down of the index due to the ex-dividend rights at the end of the March period.

By industry, the real estate, petroleum/coal, and mining sectors advanced, while the shipping, precision, and pharmaceuticals sectors declined.

We expect the U.S. economy to remain firm, and we anticipate that retailers' earnings results in early January will show a solid earnings outlook in anticipation of increased consumption due to inbound demand and wage hikes. Although valuations are not undervalued, we expect corporate earnings to rise as upward revisions to corporate earnings continue due to the benefits of the weak yen and other factors.

Although the dollar-yen exchange rate remains at historically low levels and caution about foreign exchange intervention by the government and the BOJ will weigh on equity prices, the yen is likely to come under further pressure if the current accommodative stance is maintained at the BOJ's monetary policy meeting scheduled for later in the month.

Retailers' earnings, which will be concentrated in the first half of the year, are expected to show solid performance, especially in business categories that capture inbound demand, and sales plans for the next fiscal year are likely to remain on an upward trend due to the strong results of the Spring Struggle. On the other hand, wage hikes are also a factor of rising costs, and profit prospects are likely to be affected by the skill of cost control. Although there is room for further upward momentum in earnings for the January-March period due to the recent depreciation of the yen, the assumed exchange rate for next year's corporate plan is likely to be set higher than the current rate, and the profit margin in the plan is likely to be lower than market expectations. The profit margin in the company's plan is likely to be lower than the market forecast. Although the company is expected to face some disappointment selling, the announcement of shareholder return measures and other factors should support the share price.

In terms of supply and demand, the stock market has been strong since the beginning of the year when the new NISA (small amount investment tax exemption) system was introduced, and households are expected to continuously shift their financial assets into stocks. Buying in anticipation of a breakout from the deflationary economy is also expected to continue due to the strong results of the Spring Struggle, and we expect the uptrend to continue.