Is the Sun Rising on Japanese Equities?

Japanese Structural Reforms and Economic Challenges

Under Shinzo Abe, the Japanese government has worked diligently to address some of the challenges inherent within the Japanese economy. For example, corporate governance standards are improving within Japanese corporations, and the labor force participation rate has started to rise due to more women (and foreign workers) entering the workforce. As a result, global equity investors have started to shift their attention back to the Land of the Rising Sun.

The following series of papers addresses not only the present opportunity set for Japanese equity investors, but economic and social challenges that remain for Japan's new PM. On the renewable energy front, the country is still reeling from the Fukushima nuclear disaster and is looking to rebuild its capabilities in renewables in order to meet the challenge of becoming carbon-neutral by 2050. Meanwhile, the country is also contending with disinflationary pressures and yield curve control policies that have pegged 10-year JGBs at near-zero interest since 2016.

Searching for Returns in Japan (First Sentier Investors, 2020)

For compliance reasons, this paper is only accessible in certain geographies

First Sentier argues that looks can be deceiving when it comes to investing in Japan. Weak headline economic growth since the late 1990s belies substantial corporate profit growth over the same period.

Value Creation Opportunities in Recovering Japanese Equities (Nuveen, Aug 2020)

A quicker path to coronavirus recovery in Japan, plus corporate governance improvements may lead investors back into Japanese equities.

Finding Opportunity in Japan Equity (MFS, Jul 2020)

Investors may have been under-allocated to Japanese equities. But improvements in corporate governance policies and increased competitiveness of Japanese firms may lead stockpickers back into Japanese equity markets.

Active Investing Opportunities in Japanese Equity (RBC GAM, Oct 2020)

Japanese equity performance has surprisingly been on par with other major equity markets over recent quarters. How will the new PM and other Japanese market dynamics affect performance over the following quarters?

Japan: New leadership, same stock-pickers market (Capital Group, Oct 2020)

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Capital Group discusses the new Japanese PM, the outlook for Japanese equities, and engagement opportunities with Japanese corporates.

Japan: Ex-Asia but not ex-alpha (Informa blog, Oct 2020)

Informa looks at fund flows in Japanese equities, including country-specific ETF performance characteristics.

Can Japan’s new PM Suga Deliver on Reform Promises? (Aviva Investors, Oct 2020)

For compliance reasons, this paper is only accessible in certain geographies

Shinzo Abe has recently retired and his Japanese successor is PM Yoshihide Suga. What should investors expect from this new administration?

Trapped Below Zero: The BoJ and deflation risks (FTSE Russell, Oct 2020)

FTSE Russell looks at the Japanese yield curve, specifically at the steepening that has occurred since Q1 2020.

Lasting Lessons of Abenomics – Part II of Abe’s exit (PGIM Fixed Income blog, Sep 2020)

PGIM Fixed Income reflects on Shinzo Abe’s resignation and the lessons learned from Abenomics, with a particular focus upon the structural improvements within the Japanese economy in recent years.

Sustainable Investing: The new norm for Japan? (FTSE Russell, 2020)

This article from FTSE Russell discusses sustainable investments in Japan, noting that there is a large discrepancy between ESG ratings in smaller versus larger Japanese companies.

The Struggle for Renewables in Japan (Federated Hermes blog, Oct 2020)

For compliance reasons, this paper is only accessible in certain geographies

Japan has ambitious renewable energy targets, but the Japanese energy industry was ravaged by the Fukushima disaster several years ago, and as a result the country is still in desperate need of revamping its renewable energy infrastructure.

Podcast: Japan’s first COVID-19 bond (ICMA, Jul 2020)

This 22-minute ICMA podcast covers MUFG's ESG finance strategy and the issuance of Japan's first COVID-19 bond.