CC Japan Income & Growth (CCJI) predicts 2026 could be another strong year for Japan as corporate governance reform, technological advances and the return of inflation continue to unlock value and boost asset prices.
Chair June Aitken and lead fund manager Richard Aston struck an upbeat tone as the £325m investment trust celebrated a successful first ten years on the London Stock Exchange.
Overcoming the market volatility wrought by US tariff policy, CC Japan Income & Growth’s annual report shows it generated a 25.2% underlying investment return in the year to 31 October, underpinning a 27.9% total return to shareholders, that both beat the 24.1% gain in sterling by the main TOPIX index.
This is the eighth financial year that CCJI has beaten its benchmark since launch in December 2015, providing a total return on net assets of 189.8% and a total shareholder return of 216% at the end of October, outpacing the index which returned 149.1% in sterling terms.
Having paid dividends of 3p per share in 2016, the company has grown the payout every year by 8% on average, and in the latest 12 months the 2.4%-yielder distributed 5.9p per share covered by revenues of 5.92p.
Aston, who is supported at Chikara Investments by small and mid-cap specialist Megumi Takayama and ex-Ruffer Japanese Fund co-manager Theo Wild, said it was encouraging that deteriorating geopolitics and uncertainties over the direction of the global economy had not derailed Japan’s stock market recovery.
His top performing holding in the year was Fukikura, a manufacturer of optical fibre and connectors used in the construction of data centres vital for the growth in artificial intelligence.
Aston was wary of the exuberance over AI and emphasised that Fujikuru was realising its returns now not relying on speculative forecasts.
“While acknowledging the opportunities this advancing technology presents, it is important to maintain a disciplined approach to stock selection and to not compromise on valuation, governance standards or cashflow generation,” he said.
Also contributing to the trust’s returns were financial conglomerate SBI Holdings and Nintendo, the video game entertainment company buoyed by the success of its new hardware model Switch 2.
In a sign of the growing investor activism, Carta Holdings, a listed subsidiary of marketing giant Dentsu, was subject to a tender offer by NTT DoCoMo with the telecom giant becoming its largest shareholder. Another portfolio holding, Technopro, announced a management buyout at a significant premium to the then share price, Aston said.
The manager sold out of three stocks: Noevir, a cosmetic manufacturer facing strong competition from Korean rivals; Tokyo Metro, a recent market entrant whose mid-term plan had disappointed; and GMO Internet, a “sprawling” network infrastructure provider that fell short on corporate governance.
Although Japan’s bond market was rocked this week by the announcement of a snap election by prime minister Sanae Takaichi, Aston was confident on the outlook. He cited an interview in which Hiromi Yamaha, chief executive of the Japan Exchange Group and architect of reforms to make companies more shareholder friendly, suggested less than a fifth of the ultimate potential had been so far achieved. A revision to the country’s corporate governance code this year would likely spur further action.
“To this end, we believe that the speed of change is accelerating and is evident in data reflecting associated activity such as dividend growth, share buybacks and unwinding of cross-shareholdings,” he said.
“Such a strong commitment to sustainable, long-term value creation signal an additional change in corporate behaviour and enhances the investment attraction of Japanese equities,” Aston said.
