Japan

Investment Insights by our experts and thought leaders

Abe administration's 2015-version growth strategy: Focus on productivity

We will be watching to see how companies respond this year to the Corporate Governance Code, specifically the twin issues of selling cross-shareholdings and improving capital efficiency.

Notwithstanding a brief rebound in yen strength in mid-June, the Japanese currency has continued its weakening trend against the U.S. dollar, with the yen recently dropping to its lowest level in over 12 years.

Japan’s nominal GDP, commonly used to gauge a country’s real standard of living, has remained mostly unchanged since the 1990s following the collapse of Japan’s asset price bubble and the onset of deflation.

Japan's “Show Me the Money” Corporate Governance - June 2015

We expect that profit margins will expand further in coming quarters, driven by a large corporate tax cut and continued industry rationalizations that further prove that Japan's structural profitability trend continues upward.

The Japanese stock market has continued to rise, punctuated by the Nikkei 225 recently closing above 20,000 points for the first time in 15 years.

Japanese Overseas Equity Exposure Rising

We expect that Japanese pension funds will continue to shift their investments into risky assets in 2015.

Market isn't overheating even after Nikkei touched 20,000

The market isn't overheating even though the Nikkei stock average touched the 20,000 level, nor do we believe that overseas markets are overheating right now.

With the dollar/yen hovering around JPY120 to the U.S. dollar, Japanese stocks have recently been showing extraordinary strength, marked by the Nikkei 225 breaching the JPY20,000 level on April 10 for the first time in roughly 15 years – a level that it retook on 22 April and has stayed close to ever since.

The New Governance Code – What impact will it have on Japanese companies?

Due to the developments described in this article, there is ample room for growth at Japanese firms and much opportunity for investment success.

March Tankan Report Commentary

The March “tankan” survey results are not expected to lead to the BOJ's further acceleration of QE.

G-3 Economies Should Rebound Nicely

In sum, there certainly are some worrisome issues, as always, but we find none of them convincing enough to prevent moderate increases in equity prices.

Central Bank, Inflation, Currency, Commodity and Bond Forecasts

Central Banks: Despite firm economic growth, we believe that a negative YoY CPI through September will steady the Fed's hand.

Regional Equity and Asset Class Forecasts

Coupled with our expectation for global bond yields to rise moderately, we maintain our overweight view on global equities vs. bonds.

Japanese Equity: Improved Export Data May Indicate Turning Point for Japan

The recovery in profits by Japanese export firms should continue to attract the attention of the markets in the first half of 2015.

Japan's Successful “Show Me the Money” Corporate Governance

John Vail updates his long-standing theme: Japan's Successful “Show Me the Money” Corporate Governance.

Economic Disappointment in Japan? Key points to remember (again)

The disappointing economic data should not worry investors in Japanese risk assets very much at all.

According to the 2014 Labour Survey recently released by Japan’s Ministry of Health, Labour and Welfare, total cash earnings – i.e., the total of contractual cash earnings (such as fixed monthly salaries) and other special cash earnings (such as bonuses) – of Japanese workers rose 0.8% in 2014, the first such rise in four years.

What will happen to US Treasuries if Japanese government bond yields go to zero?

In a pre-GFC and pre-QE world, zero or negative interest rates on a German, Japanese or US 10-year bond would have been considered highly implausible. However...

BOJ Indicates a Move Towards "True Core CPI" More Globally

Now that oil prices have declined, if a central bank targets its overall CPI at 2.0% for 2015, it would likely be labeled as being overly aggressive and perhaps attempting to unfairly weaken its currency.

Through the careful examination of historical data, it is possible to empirically affirm the existence of several anomalies in the stock market, even though there is not always a clear theory or explanation as to why they exist.