BCA Research is getting bullish on Japanese stocks.

The independent research firm reports that its global investment strategy service recently published a special report on Japanese equities, “concluding that there are several key forces that will likely continue to propel the market significantly higher in 2006 and possibly beyond.”

The firm suggests that it seems that the Bank of Japan has finally learnt from its past mistakes. “The central bank has shown determination in its fight against price deflation and has maintained a super-easy monetary policy,” it notes.

“Although Japan still has lingering deflation, the combination of quantitative easing, zero nominal rates and a competitive currency have allowed corporations to overcome the problem of balance sheet illiquidity and created an environment that is conducive to corporate and financial restructuring,” it adds.

“Land prices are beginning to climb again after falling for more than 15-years, which could signal waning deflationary pressure and spreading reflation in the Japanese system,” BCA concludes.