Fidelity Japan Trust: Favourable G7 2023 economic outlook for Japan

The January 2023 IMF World Economic Outlook update has reiterated, once again, the relative appeal of Japan compared with the other major developed economies. In particular, the IMF is forecasting faster 2023 economic growth for Japan. Central banks expect lower CPI, and, as a result, one may expect less pressure to raise interest rates. We have repeatedly emphasised how Fidelity Japan Trust plc (LON:FJV) adds value through its stock selection (and our last note, Opportunities from the mother of invention, highlighted how above-average innovation in Japan was an advantage to this), but a positive relative economic environment also provides following tailwinds, and helps investor sentiment.

  • Economic outlook: The IMF’s January World Economic Outlook update was again favourable for Japan, showing faster real GDP growth in 2023 (at 1.8%, more than twice the G7 average of 0.8%). Inflation expectations are less than half the advanced economies’ average, and interest rates, while rising, are a fraction of peer levels.
  • FJV’s unique value add: FJV’s approach is “growth at a reasonable price”. Companies growing because of innovation have a natural fit to the first element. FJV’s long, local presence gives it advantages over global investors, while its deep, global analytical reach is a competitive advantage over smaller, national ones.
  • Valuation: 92% of investments are listed in active markets. While some may have a degree of illiquidity, the NAV is “real”. The discount of 7% is above the average of recent levels, but it is slightly above that of its peers, whom FJV has materially outperformed over five years. FJV is run for capital growth.
  • Risks: FJV has seen periods of short-term underperformance, when its investment style has been out of favour – typically, when the market has undergone a sharp factor rotation – but recovery has usually been swift. 2022 performance may affect sentiment for a while. There are also some Japan sentiment issues.
  • Investment summary: FJV has outperformed its peers, benchmarks and UK indices, with a distinctive and active investment approach. Its companies show faster-than-average EBITDA growth (2023E ca.1.3x and 2024E 1.8x the market), and have higher RoEs and RoICs (both around one third above the market). It invests for “growth at a reasonable price” (GARP) – so company valuations are usually higher. With an active approach, investors are buying FJV’s investment process, not its portfolio on a given day. Japan offers tech-enabled growth and structural reforms, and it is levered to global trade. Its approach can be out of favour, but, under the manager’s tenure, underperformance periods have been short.
Click to view all articles for the EPIC:
Or click to view the full company profile:
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Hardman & Co

More articles like this

Fidelity Japan Trust

Tokyo stocks rise modestly

Tokyo stocks rose moderately on Monday, mainly aided by buying to secure rights to dividends ahead of the end of fiscal 2022 in Japan. The Nikkei average of 225 selected issues listed on the Tokyo Stock Exchange’s Prime

Fidelity Japan Trust

Japan stocks climb almost 2%

Asia-Pacific markets rose on Wednesday as investors looked ahead to the U.S. Federal Reserve’s latest update on its rate hike decision, as the central bank attempts to balance its inflation fight and stem a banking crisis. Japan’s Nikkei 225 led gains

Fidelity Japan Trust

Japan’s economy to bloom as hanami season kicks off

As cherry blossoms begin to bloom and revelers prepare to experience the seasonal spectacle, the nation will soon be blanketed with the dainty petals that not only bring people together but also boost the economy. For the first

Fidelity Japan Trust

Tokyo stocks end higher on China economy hope

Tokyo stocks ended higher Tuesday with the broader Topix index finishing at its highest level in more than 15 months on hopes the Chinese economy is on course to recover from COVID-19 restrictions. The Topix index finished up

Fidelity Japan Trust

Japan stocks edge higher

Japanese shares posted small gains on Monday as cautious traders awaited a week of important U.S. and global economic data as well as testimony by the incoming Bank of Japan (BOJ) leadership team. The Nikkei edged up 0.07%

Fidelity Japan Trust

Japanese market notably higher

The Japanese stock market is notably higher on Tuesday, recouping some of the losses in the previous session, with the Nikkei 225 falling below the 27,600 level, following the broadly positive cues from global markets overnight, driven by

Fidelity Japan Trust

Japan recovery continues in January

Japan’s new vehicle market continued to expand in January 2023, by 16% to 382,338 units from weak year earlier sales of 329,699 units, according to the Japan Automobile Manufacturers Association. This was the fifth consecutive month of growth

Fidelity International

Fidelity Japan Trust: December monthly fact sheet (LON: FJV)

Fidelity Japan Trust plc (LON:FJV) has published its fact sheet for the period to 31 December 2022. Portfolio Manager Commentary  The Trust recorded NAV returns of -24.3% over the 12 months to December 2022, underperforming the reference index,

Fidelity Japan Trust

Japan’s wage watershed raises economic hopes

A day after the owner of Uniqlo clothing brand stunned the nation with a plan to raise wages in Japan by up to 40 per cent, its chief financial officer told investors the pay hike was not a

Fidelity Japan Trust

M&As involving Japan companies hit record high in 2022

Mergers and acquisitions that involved Japanese companies in 2022 increased 0.6 pct from the previous year to 4,304 deals, highest on record since 1985, according to a recent survey. The rise reflected aggressive investments in the information technology

Fidelity Japan Trust

Japan’s economy will stand relatively strong this year

Heads of Japanese leading securities firms said the nation’s economy to stand relatively strong this year compared to US and Europe and expects the Nikkei 225 Index to recover 30,000 yen level this year. CEOs of Daiwa Securities

No more posts to show