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4 Things you must know before investing in Japan
1. Japan Market is Getting Cheaper
- US rate hikes push price/earnings down to around 12x for duration of tightening cycle.
- Bottoming out towards the long-term average of 14x as cycle begins to wind down.
TOPIX PER
Source: Factset
2. Weak Yen and Impact on Equity Market
- TOPIX and JPY less correlated than previously, but weak JPY helps corporate profits.
- Current USD/JPY assumptions around 120 suggest potential upside revisions on the EPS forecasts.
TOPIX FY2023 EPS top-down forecast
Source: Nomura Securities
TOPIX and JPY
Source: Factset
3. Wages in Japan
- While Japan's wages have flatlined, those in other OECD countries have risen over the years.
- The Japanese Trade Union Confederation (Rengo) , Japan's top labour group, is seeking the biggest pay raise for union members in nearly three decades next spring.
- BOJ aiming for virtuous wage-price cycle to escape decades of deflation.
Virtuous cycle of corporate activity and household disposable income
Source: Bank of Japan
4. Improving Corporate Governance and Shareholder Returns
Dividends and buybacks
Share buybacks announced
Disclaimer
The information contained in this document is intended solely for the purposes of information only and is not intended as an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. This report has not been reviewed by the Monetary Authority of Singapore.
