Skip to main content
logo
  • Funds

    Fund Explorer

    • Search our funds

    Capabilities

    • Investment Trusts
    • Fixed Income
    • Equities
    • Multi-Asset
    • Alternatives
    • ETFs

    Fund Information

    • Fund news and announcements
    • Regulatory updates
    • Administrative information
    • Policies
    • Legal Documents
    • Fund Management Charges
  • Investment Themes
    • Sustainable Investing
  • Insights

    Market Insights

    • On the Minds of Investors
    • The Weekly Brief
    • Investment Principles
    • Investment Outlook
    • Monthly Market Review
    • ESG Explained

    Portfolio Insights

    • Asset Allocation Views
    • Fixed Income Views
    • Equity Views
    • ETF Perspectives
    • Investment Trust Insights
  • How to Invest
  • About Us
    • Diversity, Equity and Inclusion
  • Contact Us
  • Role
  • Country
  • Manage your account
    Search
    Search
    Menu
    You are about to leave the site Close
    J.P. Morgan Asset Management’s website and/or mobile terms, privacy and security policies don't apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan Asset Management isn’t responsible for (and doesn't provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan Asset Management name.
    CONTINUE Go Back
    1. JFJ: Investment Themes Driving Japan’s New Economic Growth | J.P. Morgan Asset Management

    • LinkedIn Twitter Facebook
    the-jpmorgan-japanese-investment-trust-at-the-heart-of-japans-new-growth

    JFJ: Investment Themes Driving Japan’s New Economic Growth

    J.P. Morgan Investment Trust Team

    Japan is drawing the attention of investors: its economy is recovering; its benchmark market indicators, the Nikkei and TOPIX, recently hit 30-year highs. However, while the rebound makes value stocks cyclically attractive, investors should take a longer view on Japan.

    Japan’s Post-Pandemic Growth Opportunities

    Investors looking for long-term prospects should consider Japanese companies that have thrived during the pandemic. These companies are beneficiaries of themes that have bubbled under for years, yet the pandemic has served to accelerate. Japan’s late adoption of these themes, such as digitalisation, may well surprise investors who think of Japan as a futuristic society.

    The JPMorgan Japanese Investment Trust (JFJ) has long been invested in such themes and the companies at their forefront which are exciting multi-year growth prospects. Here we look at these themes, and the Trust’s holdings that are leading the way into Japan’s post-pandemic future.  


    Rapidly Digitalising Japanese Technology


    One theme in which Japan surprisingly lags the global curve – and that has advanced rapidly in the pandemic - is digitalisation. One cause is the sudden change to remote working. While UK workers transitioned smoothly from office to home, many Japanese employees could not work from home because their companies lacked the required cloud technology. Companies found themselves saddled with expensive-to-maintain proprietary software. As a result, Japan’s SMEs have embarked on the largest investment in IT infrastructure for 20 years. The Trust is benefiting from this revolution thanks to its position in OBIC, provider of standardised IT supplies, systems and support; and NRI (Nomura Research Institute), which has grown from a boutique financial IT specialist to become Japan’s leading consulting and tech solutions provider.

    A further signifier of Japan’s surprising recalcitrance to 21st century technology is that, remarkably, most legal documents were until very recently still legally required to be physically rubber-stamped. The necessary migration to remote operations has forced companies to permit electronic signatures. With its cloud accounting services and e-sign product, trust holding Bengo4 is a direct beneficiary. 


    Taking Japanese Retail Online


    Behind Japan’s high-tech image lies rubber stamping, faxing, and a low penetration rate of e-commerce and cashless payments. Pre-pandemic, only 24% of payments were cashless (compared with 90% in South Korea1), but this is starting to shift with the migration from bricks-and-mortar to online shopping, which made up a mere 13% of retail sales in 2020.2 The Trust holds strong positions in these themes, such as GMO Payment Gateway - the country’s largest cashless transaction processor and a holding since 2015 - and Shopify-like freemium e-commerce platform, BASE.

    The transition to the online sales model has wider beneficiaries; for example Nippon Prologis, a REIT (real estate investment trust) that directly invests in properties used for logistics businesses and B2B industrial products supplier MonotaRO, a 3.6% holding with the strong growth fundamentals that characterise the portfolio, also performed strongly during the pandemic.


    The Potential of the Japanese Gaming Market


    The pandemic not only increased home-working, it also increased participation in at-home leisure activities. A theme that will surely resonate with many a locked-down family, gaming is another area with Japanese associations that is, surprisingly, behind other developed markets - and thus, exciting potential. Famous Japanese companies such as Nintendo boast world-beating intellectual property in global products such as Pokémon and pandemic hit, Animal Crossing, yet they lag in monetizing profitable online content such as downloads and in-game purchases. 


    Growth Prospects for the Healthcare Sector


    Healthcare is an obvious pandemic growth sector. Japan’s ageing population is a well-known societal theme, but Japan lags on the telemedicine curve. Government deregulation legalising the marketing of drugs to doctors is good news for portfolio holding, M3, while online life insurance disruptor Lifenet saw sudden take-up during the pandemic.


    Growing Opportunities for Automation Companies


    An ageing workforce coupled with the need for physically distant practices (and increased domestic production) benefits Japan’s world-leading automation companies, such as Osaka-headquartered Keyence, which develops and manufactures factory automation systems and products. At 6.1%, Keyence is the largest portfolio holding, and has been for over eight years. Long highly profitable (its operating margin is over 50%), benefiting from societal changes, and still with an extensive growth runway, Keyence embodies the JFJ strategy.



    While of course past performance does not guarantee future returns, this growth-seeking strategy has delivered close to 6% out-performance over the last 10 years, while an exceptionally strong performance in 2020 was a resounding endorsement of the Trust’s approach. It could offer an attractive opportunity to invest in Japan’s emerging, dynamic new generation of companies.

    Quarterly Rolling 12-month performance (%) As at the end of December 2020

    Exhibit A: Table showing quarterly rolling 12-month performance ending December 2020

    Source: J.P. Morgan Asset Management/Morningstar. Net asset value performance data has been calculated on a NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP. NAV is the cum income NAV with debt at fair value, diluted for treasury and/or subscription shares if applicable, with any income reinvested. Share price performance figures are calculated on a mid market basis in GBP with income reinvested on the ex-dividend date. The performance of the company's portfolio, or NAV performance, is not the same as share price performance and shareholders may not realise returns which are the same as NAV performance. Comparison of the Company's performance is made with the benchmark. The benchmark is a recognised index of stocks which should not be taken as wholly representative of the Company's investment universe. The Company's investment strategy does not follow or track this index and therefore there may be a degree of divergence between its performance and that of the Company.

    JPMorgan Japanese Investment Trust plc


     

    1 Source: Nippon, 14 July, 2019. https://www.nippon.com/en/in-depth/d00492/the-state-of-cashless-payments-in-japan.html
    2 J.P. Morgan 2020 E-commerce Payments Trends Report: Data has been provided to J.P. Morgan by Edgar, Dunn and Company via Re-think Tokyo, 2019.


    More Insights

    JPMorgan Guide to the Markets calendar

    Sign-up to our investment trust emails

    Whether you’re looking for a monthly all-round update from our insights team, or timely updates on our individual trusts.

    Sign-up to trust emails here
    JPMorgan Karen Ward

    On the Minds of Investors

    Drawing on the depth and breadth of their market and economic expertise, our global macro strategists offer insight into today's big investment themes to enable more confident portfolio decisions.

    Views on today’s key investment themes
    the-long-view

    Helping you take the long view on your investments

    Discover how investment trusts can help you reach your long-term savings goals and manage the risks that are part and parcel of any market-based investment.

    Find out more

    This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not reliable indicators of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met.

     

    J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Investment is subject to documentation. The Annual Reports and Financial Statements, AIFMD art. 23 Investor Disclosure Document and PRIIPs Key Information Document can be obtained free of charge from JPMorgan Funds Limited or www.jpmam.co.uk/investmenttrust.

     

    This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.

    J.P. Morgan Asset Management

    • Terms of use
    • Privacy policy
    • Cookie policy
    • Accessibility statement
    • Scams and fraud
    • Sitemap
    • Investment stewardship
    Decorative
    J.P. Morgan

    • J.P. Morgan
    • JPMorgan Chase
    • Chase

    Copyright © 2023 JPMorgan Chase & Co., all rights reserved.