Superstitious types wondering whether the Topix index will continue hurtling towards the magical 2,000-point mark in the Year of the Dog face a problem. Will the pivotal dog in question be horoscopic or robotic? Later this week, Sony will relaunch its iconic automaton canine, Aibo, after more than a decade off the shelves. The alternately acclaimed and ridiculed robot dogs were discontinued in 2006, when the company, in a fit of dull prudence, shifted focus from four legged frivolity to hard margin targets, the Topix in that dull prudent year ended more or less flat.
But 1999, the year of the original Aibo's launch, was a cracker with the Topix up more than 58% over 12 months as foreign investors piled excitedly into Japanese tech names. Critically, Japan's consumer economy at the time felt ebullient enough to ensure that the first run of Aibo's sold out in just a few minutes. Clearly, Sony has judged that with Japan's total employee income, which reflects record high labour participation of 76% and correlates with consumer spending, now growing at 3% year on year, that the domestic economy is back in Aibo receptive shape.
So what chance a repeat Topix's performance? Many of the signs are good. As in '99, Japanese technology names encompassing everything from electric vehicles and robotics to AI and fintech, top the polls of retail investors' favourite stocks. While brokers are selling institutions on the narrative that stricter overtime work rules will force swathes of Japanese companies into efficiency enhancing spending on IT, automation and other Capex stories with stock names to accompany them.
The marked decoupling of the Topix from the dollar-yen rate in 2017 suggests a market faith that domestic demand will remain strong, but the downside risks to all this remains what it has now been for months - signs of tapering by the Bank of Japan. To be another robot dog year, though, will take a definitive buy-in on the part of foreigners who took profits at the end of 2017 and remain, as Goldman Sachs puts it, lightly positioned on Japanese equities. Its survey of international funds found respondants even more underweight Japan now than they were before Abenomics started luring them back in early 2014, the year that Sony finally stopped making spare parts for Aibo.