Demystifying Japanese equities in the “Abenomics” era

Concerns about structural challenges in Japan have resulted in discounted equity valuations that do not account for recent positive developments

Apr 24, 2018 | Daiji Ozawa

Japanese equities are among the best performers globally in local currency terms since December 2012, when Prime Minister Shinzo Abe took office and put in motion a series of expansionary polices referred to as “Abenomics.”

However, Japan has not benefitted from the same buoyant sentiment as other developed markets, which charted higher returns largely on the back of multiple expansions. The current valuation gap demonstrates that investors have yet to be convinced the corporate and economic revival is sustainable.

Invesco’s Daiji Ozawa examines the common concerns linked to Japan and explains why they may be overstated, namely: (1) Japanese yen appreciation (2) ageing demographics (3) high government debts and (4) capital inefficiency coupled with shareholder-unfriendly corporate governance.

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