(Bloomberg) -- Japan’s stocks are better able to withstand the pressures facing peers around the world amid growing risks of recession, according to Morgan Stanley.

“Japanese equities have historically underperformed in global downturns,” strategists led by Daniel K Blake wrote in a note. This time is different because of “newfound earnings resilience” for the nation’s companies thanks to improving capital discipline and the weak yen, they said.

The broker remains overweight on the Topix and sees Japan’s stocks as cheap. The strategists expect no tightening in Bank of Japan fiscal policy given limited inflation in the country, in contrast with the ongoing rate hikes in other nations.

Japan’s Economy Shows Greater Strength as Global Outlook Darkens

That divergence may help keep the Japanese currency weak even after its plunge to a 24-year low against the dollar, benefiting the nation’s exporters. Meanwhile, the recent loosening of pandemic restrictions should start to help the domestic recovery, according to Morgan Stanley.

“Japan’s more cautious approach to reducing Covid restrictions and employment-focused stimulus programs have meant that the economy is in a different phase vis-à-vis other DMs, now benefiting from incremental reopening tailwinds,” the strategists wrote.

The Topix is down 2% so far this year, compared with a loss of about 17% for the S&P 500 Index. The Japanese benchmark is trading at less than 13 times estimated earnings for the next 12 months compared with about 18 times for the US gauge.

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