Could Japanese equities be back on the table for investors in 2023?

by | Nov 25, 2022

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Japan is one of the world’s largest economies, but it is often overlooked by European institutional investors, However, as many of the developed world’s economies slow down, CAMRADATA’s latest whitepaper, Japanese Equity questions if it’s time for those seeking new return opportunities to think again.

The whitepaper includes insights from firms including Nippon Value Investors, Tokio Marine Asset Management, Canaccord Genuity Wealth Management, Linchpin Advisory Limited and Redington who all attended a roundtable recently hosted by CAMRADATA.

A combination of poor growth and inflation, blended with a relatively inward looking culture and business community, has often pushed any portfolio allocation to Japanese equities to the back of investors’ minds. One of the speakers said institutional investors also talk of having “been burnt before”.

However, this new report delves into how the Japanese equity proposition might be changing, and why institutional investors should have an allocation to the region, however small. It highlights signs of change around governance in Japan and “Abenomics” – the economic programme named after the late Prime Minister Shinzo Abe[i].

 

The report also looks at the impact of currency fluctuations. With the Japanese Yen currently at a record low against the US dollar, it considers what this might mean for equities and for the different styles of investing, in terms of growth versus value.

It also discusses environmental, social and governance (ESG) issues, where one speaker points out that Japan is neither “leading the charge”, nor a “laggard” when it comes to ESG investing, before ending with reasons to own Japanese equities.

Natasha Silva, Managing Director, Client Relations, CAMRADATA said, “There are many factors to consider with Japanese equities. From the fragile yen and the impact of this on the corporate landscape, to after decades of deflation how both the internal and export markets may react to higher prices for everyday goods, and how potentially higher revenues can be converted into better returns for shareholders.

 

“Yet, against this uncertainty, Japan’s tech and engineering sectors remain a constant for investors, especially in a world set on using them to reach sustainability and other business goals. Our latest whitepaper looks at the opportunities and challenges, and how investors can best place themselves to take advantage of any transformation of one of the world’s most significant economies.”

The whitepaper also includes two opinion articles from the sponsors:

·         Nippon Value Investors – ‘Reversal of Deflationary Mindset’

 

·         Tokio Marine Asset Management – ‘Flashpoint Taiwan: Where Japan Stands’

To read the Japanese Equity whitepaper, please click here.

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