Investment trust insider on JPMorgan Japanese – James Carthew: JPMorgan takes a lead in testing Japan
The performance of Japan trusts is showing a surprisingly wide dispersion of returns. Over the past year JPMorgan Japanese (JFJ) has delivered 17% growth in net asset value (NAV) and rivals at Aberdeen (AJIT) and Fidelity (FJV) have also posted decent numbers of 4.4% and 2.8% while Baillie Gifford (BGFD), the sector’s best performer over a decade, has slipped 0.5%. At the other end of the scale, however, CC Japan Income & Growth (CCJI) has lost 12.6%.
Like many other countries in Asia, Japan seemed to cope with the Covid-19 outbreak reasonably well. Just under a thousand deaths have been attributed to the virus across the country. Case numbers have climbed in recent weeks but are running at about 200 per day.
While testing rates have been a lot lower than neighbouring South Korea, the government placed great emphasis on contact tracing and testing. A voluntary lockdown was implemented, but widely complied with, and people wore masks, restricting the spread of the disease.
Economic growth has been anaemic in Japan for decades and the measures taken to control the virus tipped the country into another recession. The government and the Bank of Japan tried to stave off the worst, with measures such as a ¥100,000 (£743) handout to every citizen, more quantitative easing – including purchases of corporate bonds, and the provision of ¥110trn (£820bn) of interest-free loans to banks on condition that they lend this on to companies.
The country’s economic stagnation is reflected in its stock market returns. The Topix index is the same level as it was in 2015, and 2006/7, and 2000. For the most part, the trusts in the sector have done a lot better that this, however. This is encouraging, given the widespread prediction that, post-Covid, most developed economies are likely to be stuck in the mire of low growth, low inflation and low returns for many years to come.
In Japan’s case, the situation has been exacerbated by demographics. It is worth remembering that ageing and stagnant or shrinking populations are a feature of many other developed markets, and within a decade this will affect China too. In Japan, one aspect of this is a succession crisis for many family-run businesses. This is encouraging mergers and acquisitions.
Nevertheless, despite the sideways track of Japan’s stock market… read more here