Just over a year ago, Japan was struck by a devastating earthquake and tsunami which resulted in a nuclear accident. Yet, despite this setback, fund managers and investment professionals are optimistic on the prospects for Japanese markets.
"The disaster has done little to change our belief that the Japanese market remains attractively valued relative to history and other regions," said Shogo Maeda, head of Japanese equities at Schroders. "Growth, although slow, has resumed over recent months; wages are beginning to recover and consumer sentiment is improving. While there is evidence of a global slowdown, Japan is continuing to show resilience and is being boosted by the recovery efforts post-earthquake. It is clear to see that the Japanese market is regaining its upward trajectory so long as the global backdrop does not deteriorate significantly from here."
"The economy in general should benefit this year as reconstruction programmes finally commence in the areas worst affected by the tsunami," adds John MacDougall, manager of Baillie Gifford Shin Nippon. "Despite the events of 2011, some areas of the Japanese economy experienced very impressive rates of expansion, including e-commerce, smart phones and energy-efficient products."
If you are investing in anticipation of a market rise, a good way to do it can be via an investment trust because you may benefit from both the rising assets and possible tightening of the discount to net asset value (NAV) on the trust. Japan trusts are trading on a discount to NAV, and some have strong long-term records.
Broker Westhouse Securities suggests that JPMorgan Japanese is the most likely trust to benefit from a weak yen, while the ones focused on smaller companies are a play on recovery in domestic demand.
"Investors need to do their homework, take a long-term view and ensure they have a balanced portfolio," says Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC). "It's also worth remembering that drip-feeding your investment on a monthly basis can help smooth out some of the highs and lows in the price of shares."
Our adviser fund tips for 2012, included recommendations for GLG Japan Core Alpha and Jupiter Japan Income. You can also read our round-up on Japan shortly after the earthquake last year.
