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Is it time to invest in Japan?

The Olympic games with no fans might not give it a boost, but its ‘cheap’ companies could prove a runaway success

By ROSIE MURRAY-WEST, FINANCIAL MAIL ON SUNDAY, PUBLISHED: 21:51, 17 July 2021

Japan will dominate headlines around the globe for the next three weeks as the Olympic Games kick off this Friday…

WHY JAPAN STILL HAS A WINNING FORMULA

Sadly, Japan may not get a boost from the Games. After all, the pandemic has scuppered any hopes of a tourism boom. Meanwhile, a lack of enthusiasm for the event at home means there is little opportunity to translate Games excitement into profit…

But while the Olympic Games may be an economic damp squib, there are plenty of other reasons to suggest Japan has a winning formula for investors seeking to grow their wealth.

CHANCE TO FIND A BARGAIN

The value of Japanese companies had been rising steadily until March this year, when investors grew nervous about Japan’s response to the pandemic…

Japan is home to many brands with huge international appeal, which are poised to benefit from pent-up demand across the globe – even if Japan’s own economy takes a little while to bounce back. Among these are Sony, Nintendo, Toyota, SoftBank and Asahi…

BARRIERS TO GROWTH ARE COMING DOWN

For years, Japan’s economy has had three characteristics holding it back…

Nicholas Weindling is lead portfolio manager for the JPMorgan Japanese Investment Trust.

He believes the pandemic and an ageing population have forced companies to innovate. They have been scrambling to build software systems to allow homeworking. A pivot towards home deliveries has given a huge boost to online shopping sales…

A VOLATILE MARKET BUT FUNDS CAN HELP

If you own a global equities fund, you probably already have investments in Japanese companies. For many investors that may be sufficient.

But if you believe Japan may outperform other markets, you may choose to hold investments in a specialist Japanese fund as well…

James Carthew, at investment research company QuotedData, likes JPMorgan Japanese Investment Trust, which he says is ‘backing the companies at the forefront of technological change’. The fund has significantly outperformed its peers over the past three years, and turned a £1,000 investment into £1,446.

He also mentions AVI Japan Opportunity, which has returned 8.6 per cent this year. The fund was only launched in October 2018, so it is not possible to judge long-term performance.

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