GLOBAL REACH
Some, however, choose not to dwell on the country’s economic and demographic woes. Looking at the bigger picture means that Fidelity’s Tano sees the country as a “land of rich pickings”.
“From a bottom-up investment perspective, Japan is home to some of the world’s leading companies and brands, which command dominant market positions in global industries such as automobiles, robotics and electronics,” Tano says. “Furthermore, many SMEs are major suppliers of parts, materials and equipment that are essential to the global competitiveness of large corporations.”
Brands such as Sony, Toyota, Honda, Mitsubishi and Hitachi will appear on many investors’ radars for the revenues they generate overseas, but politics could take the edge off their earning power. In January, US President Donald Trump tore up the Trans-Pacific Partnership, a trading agreement that the US had with 12 countries, one of which was Japan. The trade agreement between the world’s first and third largest economies will have to be renegotiated.
Le Berre expects the process to be “bumpy”, but it could have a happy ending. “The only positive we see is the need for the US to have Japan and Taiwan as strong allies in the region,” he says, pointing to China’s financial might as a catalyst.
A meeting between Trump and Abe in February appears to have passed amicably. So perhaps Le Berre could yet be proved right.
If a new agreement is struck it will be interesting to see what influence this has on boardrooms across Japan. Could it encourage them to buy more companies, in the vein of Softbank’s Arm takeover? Driver wonders if Softbank could be back in the headlines soon due to its stake in US telecom Sprint.
“There is speculation about that transaction. Do they take it out?” Driver says. “Undoubtedly with having cash sat on your balance sheet not doing a great deal from a shareholder-friendly perspective there comes a point where you put that to work and find return enhancing opportunities.
“Or if you can’t find that, share buy-backs and dividends are set to continue to grow.”
It appears that there are a lot more chapters in Japan’s corporate reform story that are yet to be written.
