JP Morgan Chase & Co (NYSE: JPM) raised its recommendation on the largest Japanese bank, indicating that the firm may be bullish on the Japanese financial sector, helping raise the Nikkei in Monday’s trading.
JP Morgan Chase’s team of analyst raised its recommendation on Mitsubishi UFJ Financial Group Inc., Japan’s largest bank in terms of market value, to an “overweight” rating up from a “neutral” rating. After the recommendation, the Japanese bank’s stock rose by more than 1.6%.
The upgrade may be an indication that the company may be bullish on Japan’s banking sector as a whole. Japan’s recession ended during the second quarter of 2009, well ahead of the United States’ end of the recession which didn’t happen for a full quarter after Japan’s return to growth. When Japan got out of its recession, many feared that growth would remain shaky because of high inventories that Japanese export companies had on stock. Others feared that the deteriorating job market in Japan would inhibit growth as well.
The factors which dragged down Japanese growth appear to be having a lessening impact on the world’s second largest economy. During the first quarter of 2010, Japan saw an impressive annualized GDP growth rate of 4.6%.
Japan’s economy now appears to be on the path toward a more sustained recovery which will be beneficial for the Japanese banking industry. JP Morgan Chase’s recommendation on Mitsubishi UFJ Financial Group is a reflection of that optimism.
