The sustained growth of Asia and Japan’s increasing integration with the rest of Asia is what makes Japan’s equity markets attractive.
Never in its history has Japan been more integrated with the rest of the region. It has long been home to world-leading companies, companies with globally recognized brands, innovative technologies and those companies are starting to tap the Asian economies for growth. A decade ago, Japanese products were simply too expensive for the average Asian consumer but over time, household incomes in Asia have continued to grow driven by productivity improvements. Now the price points are starting to meet.
Miscast by many investors as a “large-cap value” market, active Japan investors can find many long-term growth opportunities across the market-cap spectrum. I tend to find growth in three distinct groups:
The Global Leaders. These are companies with globally recognized brand, leading technology, product or service. Typically these companies are tapping growth outside of Japan in both developed and emerging markets.
The Asia Growers. Companies that derive a significant or growing portion of revenues from Asia. These companies are capitalizing on the growth of the Asia’s middle class. These firms may export, trade, or locate business operations throughout this dynamic region.