Japan
Why Now?
The top down and longer term positive attributes that we see include:
Demographic Shifts and Wealth Transfer: We expect a significant wealth transfer as Japan’s older generation passes on their savings to younger generations. This transfer, amounting to approximately $5-$6 trillion, is anticipated to boost domestic demand and economic activity as younger generations inherit and spend this wealth.
Labor Market Changes: The shift from seniority-based to merit-based pay is transforming Japan’s labor market. As the war for talent intensifies, companies are increasingly offering better pay and career opportunities to attract and retain employees. This shift is expected to enhance productivity and increase incomes, further stimulating domestic demand.
Corporate Efficiency and Profitability: Japanese companies, especially under the leadership of so-called “salaryman CEOs,” have demonstrated remarkable efficiency and profitability. Despite stagnant top-line sales since the mid-1990s, these companies have managed to significantly increase profits. This indicates strong internal management and cost-cutting capabilities, positioning them well for future growth when combined with potential new investments in technology and human capital.
These factors among many more collectively create a compelling case for the continued growth and potential of Japan’s equities.
Source: Jesper Koll, UBS Global Wealth Report 2023, Wilkinson & Pickett & The Equality Trust, OECD, Bank of Japan, US Federal Reserve, Japan Labor Force Survey, Tokyo Stock Exchange, Bloomberg, Census Bureau, METI, Ministry of Finance, Milken Institute
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