GDP and market capitalization of stocks: Are Japanese stocks overvalued? (3)
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Now, the theme this time isGDP and Market Capitalization.
In a previous article, we introduced a comparison between Japan's GDP and stock market capitalization.
GDP and Market Capitalization: Are Japanese Stocks Overvalued?
GDP and Market Capitalization: Are Japanese Stocks Overvalued (2)?
This time is an update.
As of April, IMF projections put Japan's nominal GDP at 546 trillion yen at the end of 2017.
On the other hand, as of the end of October 2017, including emerging markets, Japan's stock market capitalization is 678 trillion yen.
As of November 7, the TOPIX has risen by 2.4% since the end of October, so applying this would estimate market capitalization at about 694 trillion yen.
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Source) Tokyo Stock Exchange, IMF
☆ Green: Market capitalization ÷ GDP (% on the right axis)
☆ Brown: Nikkei Stock Average (yen, left axis)
In other words,GDP ratio is 127.1%.
At the end of 1989 it was about 145%, but as Japan's GDP is not growing much currently, it can be said to be quite overvalued.
If this trend reverses, the decline could be substantial.
Determining whether something is undervalued or overvalued based solely on PER can be risky.
Note) The above is my personal view and is intended solely to improve financial literacy. Therefore, it is not prepared for investment solicitation. Please make investment decisions at your own risk.
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