Aberdeen Japan’s (AJIT’s) NAV rose by 3.3% over the year to 31 March 2020, in sterling terms.The shares increased by 6.8%, while the Topix benchmark declined by 2.5%.
The impact of covid-19 has been less severe in Japan
AJIT note that the Japanese stock market has not been immune from the global sell-off, but has been a little more stable. The epidemic in Japan has been less severe than in many other major economies. This should allow the domestic economy to re-establish itself relatively quickly, for reasons that include:
- Japanese companies reliant on global supply chains have experience from past crises enabling their management teams to devise strategies to counter disruptions to their operations.
- The underlying conservatism of Japanese corporations and their desire to preserve cash has been validated. As businesses elsewhere face financial strain, many Japanese companies are in a relatively strong position.
In terms of stimulus, the Bank of Japan stepped up its purchase of government bonds, exchange-traded funds and corporate bonds to stabilise financial markets. Furthermore, lawmakers rolled out over US$1trn in stimulus to help households and small businesses, already hit hard by the sales tax hike last October, through this difficult period.
Aberdeen Standard Investments, AJIT’s manager, note: “For many of Japan’s companies, covid-19 is expected to have a significant impact, at least in the near term. While earlier assessments of the impact were focused on a disruption of the global supply chain for a handful of industries, the spread of the pandemic has now affected the operations of every industry across the globe. The implications will be far-reaching. Whilst fiscal and monetary stimulus will help to support global economies, the more important factor will be how quickly infections have been contained and economic activity can be restored.“
AJIT: Aberdeen Japan says the pandemic’s impact has been less severe in the country