Japan resurgent: what the experts think
Snap boost
You could forgive Theresa May a rueful glance at the global headlines this week, said John Stepek on Moneyweek.com. “Turns out that calling a snap election can sometimes pay off” – and not just for politicians. Tokyo’s Nikkei Index jumped by 1% after PM Shinzo Abe’s resounding victory at the polls, marking a recordtaking 15th consecutive day of gains as investors cheered the likely continuation of the giant “Abenomics” money-printing bonanza. With the Nikkei at its highest level since 1996, Japan’s big exporters got a further competitive boost as the yen hit a three-month low against the dollar. “Japan had a truly epic bubble in the 1980s”, and coming down from it was “always going to involve a long hangover”. But the country “really does look as though it’s getting back a little of its spark”.
Still cheap?
“After years of stagnation,” Abe has certainly delivered growth, said Alex Brummer in the Daily Mail: the IMF forecasts a 1.5% expansion this year. And though deflation has been beaten back, prices are only slowly rising. meaning that “the great monetary easing still has a distance to run”. Those sound like propitious conditions for investors – particularly given the value on offer, said Ian Cowie in The Sunday Times. Even after recent rises, Japanese shares still “look enticing” compared with the peak values being chalked up in the US and Europe. As a Jpmorgan analysis notes, the Nikkei is the only leading global market where the price/earnings (P/E) ratio – which measures whether shares are cheap or expensive – “remains lower than its average for this century so far”. Japan has its problems: not least an ageing population. But the market seems at “an inflection point”.
Fund picks
Investors are spoilt for choice: Morningstar lists 180 funds that invest in Japan. The best performer over five years is Legg Mason’s I.F. Japan Equity fund (up 296%), followed by Baillie Gifford Shin Nippon (up 272%). “For those happy to accept more risk,” Adrian Lowcock of Architas tips the Pictet Japanese Equity Opportunities fund (up 127%), which also takes “short” positions – providing a hedge of sorts in the event of another “false dawn”.