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1 minute, 54 seconds to watch by  RBC Asian Equity team, M.Funaki Sep 23, 2024

Watch time: 1:54

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Where are you seeing the biggest investment opportunities in Japan’s equity market?

Earnings growth for index over the last decade has been 8.7%. This was supported by products and technology excellence and growing overseas sales. We continue to like IT sectors with names that support high demand for AI, data centres and self-driving. Japan is really important in the global semi-conductor supply chain.

We also like the real estate sector. Number one, it’s still relatively low interest rate. Number two, it will benefit from inflationary environment.

Above all, we are looking for companies with high cash and cross shareholdings and willingness to change in management strategies.

I think my team has a unique advantage. On the one hand, I am a local Japanese investor but on the other hand, the team is based overseas, and we have regional perspectives. We can identify good alpha opportunities and we also engage on ESG.

For long term themes in Japan, we see three major disruptions across industries. These are digitalization, green transformation, and portfolio transformation for better profitability and governance. It is called DX, GX, and PX.

As labour shortage continues, Japan must increase wages and to do so, productivity and consolidation are key drivers for the next decade. Just imagine a blue sky scenario in the long run where Japan stabilizes at a nominal GDP growth of 3%. Japan equity still has a long way to go.

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