Global investors have generally been bearish on Japan as repetitive criticisms have emerged of an ageing population, stagnant growth and a stale corporate culture. However, Nikko Asset Management in its whitepaper titled “Unlocking Hidden Value in Japan” says global investors are more focused on the Japan of the past while missing out on the way Japan is shaping all our futures.
Nikko AM starts by introducing the current state of Japan – political stability, economic improvements from the Abenomics era, waning influence of the yen on investments, an equity culture, consistent corporate profits and first-mover advantage.
The asset manager acknowledges Japan’s ageing population but notes that the issue is present in several countries. In fact, this ageing population provides a first-mover advantage to Japan which is innovating in the healthcare sector to care for its elderly. Nikko says companies have managed to stay profitable by adapting to worker shortages by implementing automation.
Additionally, Japan is key to Asia’s growth as it acts as a bridge between the west and the east. “Asian countries depend on Japanese technology as well as shared supply chains for economic progress,” says John Vail, Nikko Asset Management’s Chief Global Strategist.
On the geopolitical front, Japan is developing ‘soft power’, where the country is using its cultural and economic influence rather than military coercion to build trust and respect with other countries.
Meanwhile, Japan is undergoing a corporate governance reform with a progressive corporate climate, which makes the country attractive for overseas investors. In its report, Nikko AM analyses the various revisions made to Japan’s corporate governance practices and their impact on the markets. The stock markets too have evolved, with shareholder activism on the rise and an improved dividend prospect for investors.
Previously, growth investing was the area of focus, which is now changing to value investing. Nikko says structural reforms are benefitting value-heavy sectors, and a turnaround in Japanese equities is gaining momentum. This would in turn deliver stable, long-term returns.
Furthermore, the ESG investing trend provides an opportunity for investors to identify hidden value firms while also supporting environmental sustainability.
Download the full paper here.
Read more
City of London Investment Management
The case for Closed-End Funds in Emerging Markets
Closed-end funds have long been a niche investment vehicle, but what makes them particularly compelling in today’s emerging markets environment?
J.P. Morgan
The “golden era for gold”
Gold rallies on peaking yields, firm demand, and a weaker dollar outlook.
Apollo Multi Asset Management
Why absolute return matters more than ever
A disciplined absolute return strategy can deliver stability and low correlation in volatile markets.
HSBC Asset Management
Europe & EMs poised to eclipse U.S. equity dominance
Small caps in Europe and EM outperform, reversing years of large-cap dominance.
