Japan - Re-opening and Reform

The Tokyo Stock Price Index has returned 12% in yen and 8% in dollars this year, on par with the S&P 500. Japan lifted Covid restrictions only recently, so the recovery that happened in the West last year is happening there now. We anticipate the Bank of Japan will widen its yield curve control band or even abolish it, during its June or July meeting, and see the dollar yen rate 10% higher than where it is now, in a year's time. There is an argument that wage inflation and corporate reform will force Japan Inc.'s 8% return on equity higher. We believe the combination of a declining population and low profit margins will keep it low. However, some Japanese companies are leaders globally in what they do, with returns on equity above 20%. They have been good stocks to own over the past five years, and should continue to be going forward too. This episode is hosted by Mark Matthews, Head Research Asia at Julius Baer.