There was a time, not too long ago, that it was impossible to open the pages of the financial press without seeing the headline “Is Value Investing Dead?” or some version of it.  The Wall Street Journal, The Economist and Forbes Magazine all asked the question.1  Whilst the most thoughtful titles – including those above – stopped short of full-scale obituaries, the fact that the question was being asked sent a clear message: value was for losers.  Well, it is not for losers now.

In the last two years, the stylistic preference of equity markets – which for so long had been for highly priced, asset-light growth companies, hence the headlines above – has done a one-eighty.  Value investors, with their fondness for slower growing and asset-intensive but lowly-valued businesses are the heroes.  Growth investors are the ones under the cosh.  This stylistic see-saw, and the inevitable realisation that no investment style is ever really dead, has some investors questioning when market leadership might change again.  For those with an interest in Japanese equities, this piece aims to be of some help.
Is this the time for a shift in market leadership?
Firstly, let’s look at the scope for mean reversion for its own sake. The chart below shows the Topix Growth and Value indices on a total return basis over the last decade. It is clear that the value rally has been strong – very strong – making it now the winning style over one, three, five and even ten years.
Topix Growth

Source: Bloomberg, to 31.10.2023

When the boot was on the other foot, value managers were full of analogies including stretched rubber bands or over-wound springs.  Clichéd as they are, these comparisons highlighted well that a stylistic turnaround was on the cards, but they did little to suggest precisely when it should happen because markets are apt to overshoot.  The same is true now.  For sure, the rubber band has relaxed, the spring unwound, but eyeballing the chart above suggests only that it is right to consider the next shift in market leadership, it helps little in predicting its timing.


Next, let’s turn to valuations.  If the appeal of so-called value stocks is their low valuations, surely their outperformance over growthier peers diminishes their attraction and at some point, investors will be right to refocus their attentions?  Indeed, if you look at the differential in the earnings yield between the MSCI Japan growth and value indices, you can see that the gap has come down significantly over the past 12-18 months. This  normalisation suggests that much of the easy money has been made in Japanese value stocks.  That said, it also seems too early to call loudly for a shift in stylistic leadership back to growth names.

How does Japan compare to global peers?

Perhaps we can get a steer from global markets?  Here, the picture is more supportive of the idea that the resurrection of the growth factor is near in Japan, or at least nearer than it is in other regions.  The chart below shows the ratios of growth and value indices (each one indexed back to a decade ago) in Japan and other major developed markets.  The orange line, representing Japan, suggests that the pre-pandemic growth market was milder than elsewhere and the subsequent value rally stronger.  On this basis at least, investors in the Japanese market seem justified in considering a shift growthwards, at least as a priority ahead of their other global allocations.

Value chart

Source: Bloomberg, to 31.10.2023

A future of ‘measured normalisation’?

Our final and perhaps most important factor to consider when pondering the renaissance of growth stocks is the monetary environment.  As interest – or discount – rates rise, the current value of any firm’s future earnings declines. For companies with potentially much larger profits in the future or with an especially long runway of steady growth, the effect is especially severe.  As rates decline, the same mechanism works in reverse.  Might bond markets predict a shift in stylistic preference in equities?

Bloomberg data

Source: Bloomberg, to 31.10.2023. All series indexed to October 2013.

In the chart above, the blue line shows the relative performance of Japan’s style indices. As it rises, growth is outperforming value and as it falls the reverse is true.  Inflexions – marked by the vertical red and green lines – seem to coincide with changes in monetary conditions, as modelled here by the yield on ten-year Japanese government debt.  Financial theory appears to work, but not perfectly.  Big moves in bond markets, such as in late 2019 did not touch the equity market’s stylistic balance.  Still, it seems sensible to assume that for the equity market baton will be passed only when the trajectory of Japanese rates changes.  Simple!  So, will it?


This question requires a whole article of its own, luckily we’ve already written it: Inflation in Japan: threat or opportunity? – Jupiter Asset Management ( The tentative conclusion in our summer piece was that the Bank of Japan would likely use the currently elevated levels of inflation to normalise monetary policy, that is to allow yields to rise.  With its miniscule shift in stance in October, the Bank of Japan edged ever so slightly in that direction.  Survey data shows that most economists think a further move will be made before next summer.


Given what we know about interest rates and equity market preferences, the implications of a shift in policy stance by the Bank of Japan should be clear – it would further favour value over growth.  However, a shift in BoJ policy could also strengthen the Yen, the weakness of which has been a boon to many export focused sectors so far in 2023.  We think that banks and other interest rate sensitives are the clearer beneficiaries if this final value blow-off comes about.  More importantly though, our belief is that this eventuality – a final spike in value outperformance – could be what is needed to finally shift the other indicators discussed here, of mean-reversion and valuation, to the levels required for a rotation in leadership back to growthier stocks.

Maybe not today, maybe not tomorrow, but soon
Critical readers, knowledgeable of our investment approach, might question why we feel the need to make comment on this topic at all.  This would be fair.  Our investment strategy is, after all, designed to add value through a stylistic cycle without actively playing it.  The chart below showing rolling five-year relative performance for the fund and the Topix Growth and Value indices, illustrates well what we offer.2
Five year data

Past performance is no guide to the future. Source: Jupiter, NAV to NAV for Jupiter Japan Income I GBP Acc, gross income reinvested, net of fees, as at 30.09.23 over five -year rolling periods. Topix Income and Topix Growth are not the fund’s Target indices and are used here for illustrative purposes only.

We appreciate though, that many clients will adjust their allocations to try to catch the fair wind of stylistic leadership and for those, we hope that what we have presented here is helpful.  It seems to us that the answer to when growth stock will catch a break is likely “not now, but soon”.  Mean reversion and valuation indicators suggest that much of the easy money in value has been made, but that does not mean that a little more cannot be made still.  Further tightening from the Bank of Japan – widely expected in the next half-year, and likely to favour banks over Yen sensitives – could be the catalyst for the final melt-up in value stocks needed to finally push valuations and mean reversion over the edge.  Investment styles never die, but they do hibernate and after the winter it could be time again for growth stocks to rouse.



Past performance is no guide to the future. Returns may increase or decrease as a result of currency fluctuations.

Source: Morningstar, NAV to NAV, gross income reinvested, net of fees, in GBP, to 30.09.23. Target Benchmark: TSE TOPIX. Comparator: IA Japan.

Fund specific risks:

The Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. All of the fund’s expenses are charged to capital, which can reduce the potential for capital growth. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested.

Currency (FX) Risk – The Fund can be exposed to different currencies and movements in foreign exchange rates can cause the value of investments to fall as well as rise.

Pricing Risk – Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.

Market Concentration Risk (Geographical Region/Country) – Investing in a particular country or geographic region can cause the value of this investment to rise or fall more relative to investments whose focus is spread more globally in nature.

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Derivative risk – the Fund may use derivatives to reduce costs and/or the overall risk of the Fund (this is also known as Efficient Portfolio Management or “EPM”).

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For a more detailed explanation of risk factors, please refer to the “Risk Factors” section of the Scheme Particulars, available from our website at

The value of active minds: independent thinking

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

Important information

This document is intended for investment professionals* and is not for the use or benefit of other persons, including retail investors, except in Hong Kong. This document is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of the information, but no assurance or warranties are given. Holding examples are for illustrative purposes only and are not a recommendation to buy or sell. Issued in the UK by Jupiter Asset Management Limited (JAM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ is authorised and regulated by the Financial Conduct Authority. Issued in the EU by Jupiter Asset Management International S.A. (JAMI), registered address: 5, Rue Heienhaff, Senningerberg L-1736, Luxembourg which is authorised and regulated by the Commission de Surveillance du Secteur Financier. For investors in Hong Kong: Issued by Jupiter Asset Management (Hong Kong) Limited (JAM HK) and has not been reviewed by the Securities and Futures Commission. No part of this document may be reproduced in any manner without the prior permission of JAM/JAMI/JAM HK.

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