'Spring fever' infects stocks

There has been an outbreak of spring fever in the equity markets. The FTSE All-World Index has reached its best level since June 2008. The FTSE 100 is at a five and a half-year high and America's Dow Jones index is at a record above 15,000 having hit 14,000 a mere two months ago.

The world's best major stock market this year, however, has been Japan's Nikkei 225 index. It has gained 37% in 2013 and 65% since its rally began in November, reaching 14,000 for the first time since 2008.

What the commentators said

Despite the Nikkei's impressive surge so far, there is plenty of scope for further gains. The rally is based on the Bank of Japan, urged on by the government of Shinzo Abe, attempting to print enough money to drive inflation into positive territory. This is weakening the yen, implying a jump in profits in the stock market's heavyweight exporters.

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The Bank of Japan intends to double the size of Japan's monetary base over the next two years, said Fidelity's Tom Stevenson in The Sunday Telegraph. "This will make it far and away the most aggressive of the world's central banks."

There is also ample scope for further yen falls. It has only declined from 75 to 100 to the greenback, a correction from historically extremely expensive levels. In the 1990s, it fell from 75 to 145 in four years. A third of Japanese earnings stem from overseas, so a further 20% decline in the currency implies a double-digit increase in corporate profits, added Stevenson.

As these trends continue, plenty more investors will be tempted to jump on the bandwagon, both in Japan and overseas. "In the third quarter, everyone in the world who was underweight Japan and that's still most investors, [will] scramble to get exposure to Japanese stocks," said Edward Rogers of Rogers Investment Advisors.

The gradual improvement in both the global economy and the Japanese economy should provide added cheer, said Dhara Ranasinghe on Cnbc.com. GDP is expected to have reached an annual pace of 2% in the first quarter of 2013.

Japanese household spending hit a nine-year high in March, with some consumers evidently encouraged by the renewed push to boost the economy and by their improving stock market portfolios. Given all this, as Tai Hui of JP Morgan Funds put it, we "would still be long" Japanese equities.