Japanese Equities Might Be the Most Attractive Asset Class for Years to Come.

August 24, 2023

ABSTRACT:

Despite years of persistent deflationary pressures, a confluence of factors including extreme monetary stimulus through Quantitative and Qualitative Easing (QQE), the implementation of Yield Curve Control (YCC), a pandemic-induced fiscal splurge and an energy price shock, have collectively driven inflation in Japan to levels not witnessed in decades. Moreover, the enduring influence of the Third Arrow of Abenomics continues to reshape corporate governance and instigate reforms, leading to efficiency gains and increased shareholder returns through rising dividends, and increasingly common share-buyback programs.

The prospect of an end to YCC and QQE, along with the potential for a sustained uptick in wages and the ongoing drive for corporate reform, act as catalysts that could unlock a substantial appreciation of the Japanese Yen and reinvestment into the local economy, in a market we believe are structurally mispriced. This presents a rare opportunity for long-term investors. In particular, active managers with a sustainable competitive advantage.

INFLATION

Whether the Bank of Japan have the ability to hit its inflation target in the face of sustained deflationary pressures, a massive pile of debt and evermore negative demographics, is a question most market participants and bankers might have a quick ponder…and the move on swiftly to more important matters. Indeed, for years Japan has been stuck in a deflationary glut that has become part of everyday life and ingrained in the mindset of Mrs Watanabe.

But times they are a changing! Or so it seems…

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LeifBridge Investment Services
Shard Capital Partners
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London, EC3A 8BE
United Kingdom

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LeifBridge is a trading name of Shard Capital Partners LLP. Shard Capital Partners LLP is a limited liability partnership, registered in England with registration number OC360394. Shard Capital Partners LLP Registered office:36-38 Cornhill, London, EC3V 3NG.. Shard Capital Partners LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom, reference number 538762.

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