A stronger-than-expected jobs report last Friday firmed expectations that the Fed may raise rates in December. However, they have made it very clear that even after the first hike, the monetary policy is going to stay accommodative for quite some time. While a recovering economy and still accommodative monetary policy are good for US stocks, many investors are worried about rich valuations in the face of lackluster earnings.

Investors should consider adding some Japanese stocks and ETFs to their portfolios, given expectations of additional stimulus, rising corporate profitability and still attractive valuations. (Read: 4 Easy Tips on How to Save Money When Investing in ETFs)

Stimulus Expectations Rising

In its last meeting, the Bank of Japan decided to keep its powder dry and maintained the QE at the current level of ¥80 trillion ($660 billion) annually. However taking into account the impact of emerging markets slowdown, the bank downgraded its growth projections.

Many still expect that the BOJ will have to announce an increase in asset purchases in the coming months. If the central bank decides to keep the stimulus unchanged, despite weak economic outlook, it will likely to be perceived as an acceptance by BOJ of its inability to ward-off deflation. (Read: Amazon All Set for the Holiday Season, 4 ETFs to Buy)

The BOJ governor reiterated their resolve to take further policy action if needed and the case for additional easing continues to strengthen.

Is Abenomics Working?

The headline consumer prices index had risen after the launch of Abenomics in 2013 but has fallen back to zero, thanks mainly to the collapse in oil prices.  Sales tax hike last year also forced consumers to cut spending and pushed inflation lower.  The BOJ has now extended the deadline for achieving inflation target of 2% by six months.

On the other hand, a new index of inflation, which excludes energy and food, has been rising; it was up 1.1% in August and 1.2% in September.  The labor market has tightened with unemployment rate plunging to 3.4%. And the stock market is up about 120% since the launch of Abenomics (in local currency terms), thanks mainly to a surge in corporate profits, while the yen has declined almost 30%. (Read: Highflier Airline Earnings; Time for JETS ETF)