Japan in focus
In the latest of his series on investment abroad, Liam Robb asks, could now be the moment when the Japanese stock market at last begins to take a turn for the profitable?
Wednesday 05 March 1997
If further proof were needed, then a glance at the financial pages should provide it: the five worst-performing unit and investment trusts over one, three, five and 10 years all include a Japan fund.
While the stock-markets of all Western economies have recently reached all-time highs, the Nikkei 225 - the most widely observed indicator of market performance - has, in sterling terms, dropped by nearly 30 per cent in 12 months. Even interest rates of 0.5 per cent have failed to stimulate the demand from foreign investors that the market so desperately needs.
It is a far cry from the days of the late Eighties when the country enjoyed its boom years and the Nikkei stood at nearly 40,000 - more than twice today's level. During that bullish period, capital expenditure soared, creating an "asset bubble" which pushed valuations on property and equities to levels which were quite simply unsustainable.
"And ever since then the stock-market has been shedding the overly optimistic premium investors had attributed to it," explains James Salter, manager of the Schroder Japan Growth Fund. "The government has attempted to implement measures to stem the market tail-off, and has injected something like Y65 trillion (pounds 33bn) into the economy - the biggest fiscal stimulus any OECD country has seen since the Second World War - but while this has helped to some extent, investors have still to be convinced that the economy is genuinely back on track."
Poor fundamentals have much to do with the severe share price declines: a slow-down in economic growth (even the optimists expect GDP growth to remain below 2 per cent this year), a large budget deficit, and continuing poor corporate earnings.
An additional concern for investors is the Japanese government's plan to introduce a consumption tax - broadly equivalent to our VAT - at the end of March. The new tax, which is expected to be set at between 3 and 5 per cent, is likely severely to dampen domestic retail sales.
One or two rays of hope pierce the economic gloom. The Bank of Japan, for example, has been successful in its efforts to reduce the strength of the yen, which for so many years stymied Japanese industry. At its peak in May 1995 there were 133 yen to the pound; the exchange rate now stands at about 200.
The weakening currency has ensured that, while overall returns of the 1,700 companies listed on the Tokyo Stock Exchange have been amongst the worst in the world (with the banking, steel and petrochemical sectors having all performed especially poorly), some individual blue chips with large overseas exposure have done exceptionally well.
The share prices of Honda, TDK and Sony, for example, have all recently reached all-time highs. Canon, the camera and office equipment manufacturer, recently announced a 56 per cent increase in profits, fuelled by a weak yen (the company derives 80 per cent of its sales revenue from abroad) and a strong demand for computer-related products. Such companies' heavy weighting in the Nikkei has protected the index from even sharper falls.
Schroders is still relatively bullish on the pharmaceuticals sector. Sankyo, which has done particularly well in the States on the back of an oral anti-diabetic drug, is particularly in favour. Electronics companies with an international presence, such as Matsushita Electrical Industries (MEI), are also on the buy-list.
"Overall, however, the next six months will be very difficult to call," says James Salter. "The economic background is still uncertain and for the next two years Japan will remain a stock-pickers market." And the next real bull run? "We will probably not see it until Japanese industry has really grasped the nettle of share-holder value," he saysn
Performance Statistics: Datastream. Best performing Japan unit trusts over the past year include GT's Japan Growth and Schroder's Tokyo Inc. Best performing investment trusts include Fleming's Japanese and GT (again) Japan.
- 1 This is what happens when you tattoo Charmander on yourself, drunk, and with no experience
- 2 BBC election debate: The one photo that summed up the whole 90-minute leaders debate
- 3 18th century sex toy found in 'toilet of sword fighting school' in Poland
- 4 The Batman v Superman: Dawn of Justice trailer has leaked – watch
- 5 Rebecca Francis accuses Ricky Gervais of using 'influence' to target female hunters after receiving barrage of death threats
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
If I’m being racially abused I don’t need a white stranger with a saviour complex to rescue me
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
Russian warships in English Channel 'to conduct anti-aircraft and anti-submarine military drills'
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...
Day In a Page
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000