There has been a big move in the yen, and the reason it has come about is because Japan has been doing the opposite of the US. Japan has very low inflation and the central bank is not tightening monetary policy and raising rates but rather it has been resolute in keeping monetary conditions as loose as it possibly can.


Japan is a major industrial economy, so a weaker yen is a good thing – though not as good as it used to be. Daiwa Bank estimates that a one yen move versus the dollar has a 0.4% impact on a company’s current profit, whereas 10 or 15 years ago it was 1%. The difference is offshoring. Japan used to make a lot of stuff – cars, electronics, industrial equipment – in Japan and sell it overseas. Now, it makes a lot of stuff overseas and sells it overseas. Companies benefit from the translation of those profits rather than getting revenue in foreign currency and costs in yen.


People are talking about onshoring – bringing production back to Japan — because the yen is weak, and Japan is a cheap place to make things again but that hasn’t happened yet.


The macro-economic situation for Japan is difficult. It’s a well-connected industrial economy exposed to the global economic cycle, and that cycle is challenging at the moment. Nevertheless, the current environment is throwing up some opportunities, and we’re trying to take advantage of those.


The positives for Japan are on the stock side — the realities of the Japanese economy in the corporate sector. For example, demand may be slowing globally and that might cause financial stress. There is no financial stress in Japan, where around 55% of companies have net cash positions on their balance sheets, and 40% of non-financial companies have net cash worth in excess of 20% of their equity. The household sector also is in a good cash and savings position. Japan has solidity and the ability to keep the dividends coming.


Investors often have a small allocation to Japan. Think of Japan as a diversifier. It is different from other major developed markets. There are headwinds, including the demographics of an aging population and the reduction in consumption because of that.


The final thing with respect to Japan is that it is probably number one in the world in market inefficiency. There’s a lot of sand in the machine, with some massive value traps, but that helps create huge opportunities. As active investors, we should be able to take advantage of that.


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.


*In Hong Kong, investment professionals refer to Professional Investors as defined under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) and in Singapore, Institutional Investors as defined under Section 304 of the Securities and Futures Act, Chapter 289 of Singapore. 29377