Japan's Nikkei stock average could rally nearly 30 percent in 2013 due to an aggressive push to reflate the economy under the country's new premier, the chief executive of Daiwa Securities Group told Reuters in an interview.
While securities executives are known for their bullish market predictions, the comments from Takashi Hibino reflect an optimism among business leaders that the policies of Shinzo Abe will give Japan's sluggish economy a needed jolt.
Abe, who is set to become prime minister on Wednesday after his opposition Liberal Democratic Party won this month's lower house election, is a proponent of fiscal expansion and aggressive monetary policy to defeat deflation, which has sapped the world's third-largest economy for nearly two decades.
"If the correct policies are enacted the market will rise," Hibino said in an interview on Friday. His comments were embargoed for release on December 26.
"There has not been an administration as committed to escaping deflation. And that's why this time I choose to be optimistic."
Hibino predicted that the Nikkei, which has surged 15 percent since mid-November when elections were called, would likely trade between 9,500 and 13,000 next year. The upper limit would mark a 29 percent gain on Tuesday's close of 10,080.12.
On the back of the upturn in stocks, Hibino said he was confident Japan's second-largest brokerage would generate a net profit in the current financial year through March 2013, after losing a combined 76.7 billion yen ($904.5 million) in the previous two years.
Daiwa cut more than 500 jobs overseas starting in 2011 to stem the losses. Its biggest weakness has been investment banking, where it has struggled since ending a joint venture with Sumitomo Mitsui Financial Group in 2009.
Hibino said Daiwa, whose chief rival is industry leader Nomura Holdings Inc, was not looking for a partner in investment banking, noting that speculation it could come under the umbrella of a Japanese lender had recently died down.
He said Daiwa was not planning any further headcount cuts overseas but was shifting some staffing numbers within Europe. This included putting more people in regions such as Germany where demand for banking services was strong and trimming staff elsewhere, although he did not specify where cuts would take place.
Daiwa's biggest focus will be on encouraging customers to shift more of their savings into investment products, Hibino said. This strategy hinges in part on expanding its online bank, which has amassed 2 trillion yen in assets since its launch last year.
Japanese households hold the bulk of their 1,500 trillion yen in assets in low-yielding savings accounts, and persuading them to invest more has been a long-held ambition of the securities industry that has been slow to materialize.
Hibino believes conditions are now ripe for capturing that latent demand. He said Japanese stocks have bottomed out and the decades-long strengthening of the yen came to an end last year, boding well for corporate profits.
"Savings to investment is something that has been talked about for a long time but hasn't happened. That's because the markets have been going down," he said.
($1 = 84.7950 Japanese yen)
(Editing by Edmund Klamann)