Analysis-Japan’s inflation comeback prompts investors to tear up old playbooks By Reuters

By Naomi Rovnick and Kevin Buckland

LONDON/TOKYO (Reuters) – Global inflationary forces are finally seeping into Japan’s economy after decades of falling prices, forcing investors to radically rethink their Japan bets as the Bank of Japan considers a major policy shift.

International investors, who have long favoured stocks benefiting from Japan’s ageing population or a weakening yen, are tearing up their playbooks to focus on expected higher interest rates, more generous dividends and a revival in consumer spending.

The policy switch has been slow in coming but could herald an entirely new way of investing in Japan if a predicted long-term inflation rate of 2% in 2024 really happens.

Japanese shoppers who no longer expect prices to keep falling may make big purchases. If the BOJ pulls interest rates above zero for the first time in years, banks’ lending margins could rise.

Japanese stock markets have already rallied to around their highest since 1990, with consumer and financial stocks outperforming domestic…