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TOKYO, April 28 (Reuters) - A scorching rally in Japanese shares that appeared to have run ahead of economic prospects has stalled, but analysts are betting it will resume as early as mid-year as the country’s heavily cyclical stocks thrive on global growth.
A world-beating 33% rally in the Nikkei 225 from the end of October has faltered around the 30,000 mark since mid-February, even as other major stock indexes reached for new highs almost every week, led by U.S. equities.
Faith in the recovery from the COVID-19 pandemic that had made the Nikkei the darling of investment bets on global reflation has faltered. Japanese investors have turned cautious about pushing the index back to levels not seen since the bubble economy burst in the early 1990s.
2020 had an inauspicious, if not unexpected, start for the world’s third-largest economy.
For the first time since 2015 and as predicted by the country’s top research firms last year Japan slipped into a recession during the first three months of 2020, ushered in by an increased consumption tax, natural disasters, and trade troubles with China.
But as the country moved from a “gentle recession” into a “technical recession” marked by two consecutive quarters of negative growth, the worst was yet to come as the novel coronavirus swept the globe and upended every aspect of life in Japan.
By the end of the summer, the economy had recorded its worst contraction on record of almost 8 percent, even as the country contained the Covid-19 pandemic better than its Western counterparts.