Marie Miyashiro
Nanuk Asset Management (Nanuk), an industry leader in sustainable investing, predicts the performance of Japanese equities in 2024 to be underpinned by structural changes, as corporate government improvements make the market more attractive to investors, despite fears that the nation is slipping into a recession.
Last year, the Tokyo Stock Exchange (TSE) revamped its market restructuring rules. Among the measures was the requirement for listed companies to ‘comply or explain’ if the stock is trading at a price to book ratio below one. These companies need to disclose their plans for improvement, with the view towards how they can increase their long-term corporate value.
Portfolio Manager at Nanuk Asset Management, Marie Miyashiro, believes this reform is a key driver in the market’s ongoing push towards improving Japanese corporate governance structures to advance both business and investor outcomes.
“Listed Japanese companies are now more committed to improving their corporate governance and materialise shareholder value. For investors, this creates an opportunity to benefit from improved corporate financial performance and a higher stock market multiple,” Ms Miyashiro said.
Ms Miyashiro also noted that there has been an acceleration in the unwinding of cross shareholdings among listed companies. This should encourage further foreign investment into the market.
Additionally, the recently revamped Nippon Individual Savings Account (NISA) program further incentivises domestic households to invest in equities. Initially introduced in 2014, the Japanese Government initiative allows equity investments in a tax-exempt NISA account for a lifetime, which Ms Miyashiro notes as an additional driver of domestic retail market participation.
“Given that only around 15% of the local population have taken out of one these accounts, there remains a significant scope for growth, as the Government continues to look at ways to incentivise residents to invest towards their retirements.”
The strength of the Japanese equities market comes as the nation’s economy slips into a recession following the contraction of GDP for two straight quarters.
“Fears around recession will likely prolong a stimulative monetary policy in Japan, resulting in a prolonged weak yen environment, benefiting exporters” Ms Miyashiro said.
In line with Nanuk’s investment philosophy focused on sustainability, Ms Miyashiro is seeing value across multiple sectors and companies within the market. This includes Advantest, a leading manufacturer of testing equipment for the semiconductor industry, as well as Murata, a global leader in ceramic capacitors used in many electronic devices including smartphones, automobiles and datacentres.
“We see other opportunities in the market that we continually assess to potentially add into our portfolio.”