In order to enter the page please read the information below and affirm by clicking the accept button that you have read and understood the information provided.
FOR PROFESSIONAL CLIENTS/ASSET OR WEALTH MANAGERS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
I affirm that I am a Professional Client / Tied Agent as defined in the Markets in Financial Instruments Directive (MiFID) published by the European Commission.
This is a marketing communication and as such the views contained herein are not 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 a reliable indicator 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 https://www.jpmorgan.com/emea-privacy-policy
As the product may not be authorized or its offering may be restricted in your jurisdiction, it is the responsibility of every reader to satisfy himself as to the full observance of the laws and regulations of the relevant jurisdiction. All transactions should be based on the latest available Prospectus, the Key Investor Information Document (KIID) and any applicable local offering document. These documents together with the annual report, semi-annual report and the articles of incorporation for the Luxembourg domiciled products are available free of charge upon request from JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg or your J.P. Morgan Asset Management regional contact.
This communication is issued in Europe (excluding UK) by JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg, R.C.S. Luxembourg B27900, corporate capital EUR 10.000.000.
Terms of Use
1. General information
The information on this Site is approved by JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Luxembourg.
This Site provides information about JPMorgan investment funds ("JPM Funds"). This Site is strictly limited to information ends and is not allowed to be used for subscription or transactions of units/shares of JPM Funds. This information should not be regarded as giving you investment or tax advice about our products. If you are unclear about any of the information on this Site or its suitability for you, please contact your financial or tax adviser, or an independent financial or tax adviser before making any investment or financial decisions.
This Site should not be accessed by any person in any jurisdiction where (by reason of that person's nationality, residence or otherwise) the publication or availability of this Site is prohibited. In particular, this Site is reserved exclusively for non-US Persons*. The information in this Site is not for distribution to and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States of America to or for the benefit of US Persons.
Messages that you send to us by e-mail may not be secure. We recommend that you do not send any confidential information to us by e-mail. If you choose to send any confidential information to us via e-mail you do so at your own risk with the knowledge that a third party may intercept this information and we do not accept any responsibility for the security or integrity of such information.
We will try to keep this site operational at all times. However, we cannot guarantee that this Site or any of the various features upon it will always be available.
The hyperlinks provided on this Site are only provided for information and convenience purposes. JPMorgan Asset Management (Europe) S.à r.l. is not responsible for the content of external internet sites that link to or are accessible from this Site. JPMorgan Asset Management (Europe) S.à r.l. does not assume any responsibility or liability with respect to any website accessed via this Site.
Prospective investors should consult their own professional advisers on the tax implications of making an investment in, holding or disposing of any JPM Fund and the receipt of distributions with respect to such a fund.
2. Privacy and cookie policies
Please refer to our Privacy and Cookie Policies via the footer link.
3. Key investment risks
It is important that you read the relevant documentation (funds prospectus, Key Investor Information Document ‘KIID’) before you invest in JPM Funds to ensure you understand the specific risks involved and to determine whether it is a suitable product for you. A copy of the funds prospectus, the Key Investor Information Document ‘KIID’, as well as the annual and semi annual reports of the JPM Funds are available free of charge upon request from JPMorgan Asset Management (Europe) S.à r.l..
The value of shares/units of JPM Funds and any income from them can go down as well as up and you may not get back all that you have invested.
Estimates of future returns or indications of past performance on this Site are for information purposes only and should not be construed as a guarantee of current or future returns or performance.
Exchange rate changes may cause the value of underlying overseas investments to go down as well as up. Changes in currency rates of exchange may have an adverse effect on the value or income (if any) of the JPM Funds.
When investing in emerging market funds, emerging markets may be more volatile and the risk to your capital is greater.
The level of tax benefits and liabilities will depend on individual circumstances and may be subject to change in the future.
4. Combating financial crime
We are committed to combating financial crime and the prevention of money laundering. Accordingly we may need to verify your identity and carry out appropriate security checks.
5. Company information
J.P. Morgan Asset Management is a trading name. This business is mainly provided through subsidiaries or affiliate of J.P.Morgan Chase & Co.
JPMorgan Asset Management (Europe) S.à r.l., registered office is at 6, route de Trèves, L-2633 Senningerberg, Luxembourg.
6. Legal information
Whilst we will use every reasonable effort to ensure that the information contained on this Site is accurate as at the date of publication of such documents, we cannot guarantee the accuracy, suitability or completeness of any such information or the availability of the Site. We accept no liability for any data transmission errors such as data loss or damage or alteration of any kind. Accordingly JPMorgan Asset Management (Europe) S.à r.l. excludes any liability for any loss and/or damage (direct or consequential) arising from the use of any part of this Site.
All copyright, patent, intellectual and other property in the information contained in this Site is held by JPMorgan Asset Management (Europe) S.à r.l., unless otherwise indicated. No rights of any kind are licensed or assigned or shall otherwise pass to persons accessing this information. You may download or print copies of the reports or information contained within this Site for your own private non-commercial use only, provided that you do not change any copyright, trade mark or other proprietary notices; all other copying, reproducing, transmitting, distributing or displaying of material on this Site (by any means and in whole or in part) is prohibited.
* US Person includes, but is not limited to, a person (including a partnership, corporation, limited liability company or similar entity) that is a citizen or a resident of the United States or is organised or incorporated under the laws of the United States. Certain restrictions also apply to any subsequent transfer of Shares in the United States or to US Persons. Should a Shareholder become a US Person and such US Person is not compulsory redeemed, such US Person may be subject to US withholding taxes and tax reporting.
Accessibility Statement
In the creation of this website, J.P. Morgan Asset Management (JPMAM) is committed to making the content accessible to the widest possible audience. Our aim is to ensure that web pages available on this site comply with Priority 1 and a number of Priority 2 items of the W3C Web Content Accessibility Guidelines and best practice recommendations as stated by the Web Accessibility Initiative.
Our goal of continuous improvement means that we regularly review pages and documents to upgrade any legacy content to comply with current accessibility standards.
Pages are created using recognised structure such as emphasis and page headers.
Design is controlled using stylesheets allowing for the control of font size and more.
Images that contain important information will have appropriate alternative text.
Text size can be controlled through your chosen web browser, please consult the browser help documentation for more information.
A site map is provided to assist with site navigation and structure.
Adobe Acrobat Portable Document Format (PDF) Files
If you are using assistive technologies and are unable to access the contents of PDF documents, Adobe Systems, Inc., provides a free translation service through their Adobe Access web pages which will translate PDF files to web pages (HTML documents).
For pages that are not viewed directly from the internet, Adobe Access has a free downloadable accessibility plug-in for use with the latest versions of the Adobe Acrobat Reader for virtually all operating systems. This plug-in allows access to PDF documents with assistive technologies. Please visit the Adobe Access web site for further information.
Browser compatibility
These pages are designed for modern web browsers, but should be accessible in all browsers. This includes simple text browsers and adaptive browsers. The pages may not appear the same in old browsers or browsers that do not follow internet standards, though the information should still be accessible.
Contact us
If you require any of the information available on this site in a different format, have any comments or suggestions to enhance your experience, or require assistance with a particular document or page, please contact us with your enquiry.
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.
Japan has moved back into the limelight in 2025. While the record number of foreign tourists has placed the country as one of the favourite holiday destinations, it’s also rapidly coming back in to favour with the international investment community. Readers of the last few annual outlooks we have produced will know we have been banging the drum on the improved outlook for shareholder returns in Japan for a number of years, however the case continues to strengthen.
In 2024, the MSCI Japan Index recorded another strong year of performance, returning 21.0% in local currency terms (15.8% in EUR terms). The index has delivered a total return of 8.1% p.a. (in EUR terms) over the last 10 years, driven by a similar pace of earnings per share (EPS) growth, while the valuation has been virtually flat with some volatility in the interim period (all data: Bloomberg as of 31 Deecember 2024).
Looking forward, we believe EPS will continue to grow at a mid-single digit percent over the medium term. This, combined with an attractive valuation, makes us optimistic on the outlook.
1. Long runway for the corporate governance reform in Japan
As portfolio managers, our ultimate goal is to work with company management as long-term shareholders to establish strong governance, which helps to facilitate:
Better capital allocation - which involves greater shareholder return and balance sheet efficiency; and
Higher profit margins and stronger topline growth.
On the first point, we are encouraged by recent developments, particularly since the Tokyo Stock Exchange (TSE) urged listed companies to take “Action to Implement Management that is Conscious of Cost of Capital and Stock Price” in March 2023. The call has led to a significant increase in share buybacks in 2024.
Exhibit 1: Pace of buybacks has accelerated: Japan has seen increasing presence of activist investors
Source: Goldman Sachs, Data as of 31 Dec 2024.
It is also noteworthy that some companies have officially committed to reducing the amount of cash on their balance sheets and started to return the excess cash to shareholders. However, they are exceptions, and many companies continue to accumulate cash on the balance sheet. Despite the strong EPS growth in the last 10 years, the aggregate return on equity (ROE) has been capped at ~10% due to the increase in the denominator which in turn is a result of retained earnings.
We have also seen 94 de-listings from the TSE in 2024 in a drive for quality, the highest number since 2013 and the first ever decrease in the total number of companies in the market.
Exhibit 2: Net profits and return on equity growth seen on a broad base
Source: Bloomberg, Data as of 31 December 2024.
On the point of higher revenue and profit margins, we are at the early stage of transformation for many businesses, where some companies have started to focus on a smaller number of business lines by divesting underperforming businesses. Too many companies in Japan are overly diversified into businesses which offer little synergies and inadequate returns. Private equity firms have played an important role in this respect, and we believe this trend will accelerate.
One of the best examples is Hitachi. It had 22 listed subsidiaries in 2008, the same year when it reported a 787 billion yen loss (circa $8 billion at the time). Since then, the company has sold all of these subsidiaries to private equity firms and industrial buyers. This has resulted in a leaner, faster growing business focused on core operations in green energy / rail, and digital systems / services whose stock price has appreciated 18.6% p.a. in EUR terms over the last five years. JSR, a global leader in photoresists used for manufacturing leading-edge semiconductors, is another example. In 2021, the company exited from the synthetic rubber manufacturing which was deeply cyclical and low margin (JSR originally stood for Japan Synthetic Rubber). The firm was acquired by a private equity firm in 2024.
Exhibit 3A: Focused companies tend to have better returns
Source: Jefferies, MSCI. Data as of 17 September 2024.
Exhibit 3B: Japanese companies still have non core segments that can be divested
Source: Jefferies, MSCI. Data as of 17 September 2024.
2. Key drivers for accelerating the corporate reform
Regulators: The Financial Supervision Agency (FSA) along with the Tokyo Stock Exchange is responsible for updates to the Corporate Governance Code. They have been increasingly critical of strategic holdings of shares of other companies, also known as cross shareholdings. We are encouraged to see an acceleration of cross-shareholding unwinding, partly as a result of the FSA’s initiatives. The most noteworthy is the commitment by the three largest insurance companies to sell the cross shareholdings entirely.
Exhibit 4: Cross-shareholdings are being divested faster than before
Source: JPM CIB Research, Data as of 31 March 2024.
Tokyo Stock Exchange: As a follow up to “Action to Implement Management that is Conscious of Cost of Capital and Stock Price”, as announced by the TSE on 31 March 2023, the TSE published a list of companies that have either disclosed capital efficiency measures or have such measures under consideration. The list contained 815 companies, or 49% of the firms listed on the Prime section of TSE(and 19% of those listed on the Standard section) as of 31 December 2023. Following this, the TSE continued efforts by publishing best practice lists showing companies that were conscious of cost of capital and stock price, as well listing examples of bad practices where companies are not aligned with investors’ perspectives.
In addition, the TSE announced higher standards for TOPIX Index constituents which will disqualify around 1000 companies by July 2028. The TOPIX Index is the bellwether in Japan and many companies pride themselves for being part of it.
Shareholders: Companies with poor governance and business performance have seen a meaningful decline in support from shareholders at annual general meetings in recent years. Under this pressure, they are increasing shareholder returns and bringing greater independence and diversity on boards. Shareholder support for top executives who delivered ROE of less than 5% has declined materially in recent years.
Exhibit 5: Investors are voting against management with poor RoE track records – Votes for management by range of RoE
Source: Daiwa Management. Data as of 31 December 2024.
Activists and private equity funds: In recent years, the presence of activist investors in Japan has notably increased, driven by a combination of corporate governance reforms and changing market dynamics. Traditionally, Japan’s corporate culture was characterised by stable, long-term relationships between companies, banks, and stakeholders, often resistant to external influence. However, institutional investors are now more willing to support activist campaigns, partly under pressure from asset owners.
Japan has been a fertile hunting ground for private equity firms as well. There are at least three reasons for this:
There are many attractive targets where the potential to release shareholder value is significant through better capital allocation and restructuring of underperforming businesses.
An increasing number of companies are looking to divest non-core businesses where they no longer see themselves as “best owners”.
Some companies have decided the benefit of going private outweighs the cost of being listed.
These forces which are mutually reinforcing suggest the shift to a more dynamic corporate Japan is likely to accelerate further, not roll-back.
Exhibit 6: Activist investors have been increasing their investments in Japanese companies
Source: Goldman Sachs, Data as of 31 Dec 2024.
Exhibit 7: Japanese companies are becoming takeover/buyout targets
Source: Nikkei Value Search, Goldman Sachs Global Investment Research. Latest Data as of 31 December.
3. Inflation in Japan and its impact on domestic equities
Breaking the deflationary cycle of three decades is prompting households to revisit domestic equities and will return Japan to nominal growth, improving the environment for corporates to grow and invest. In a country where the population is aging and declining, companies are being forced to pay higher wages to attract and retain talent. With this background, the wage growth accelerated in 2024 and the expectations are that they will continue to rise at a similar rate in 2025. At the same time, companies are trying their best to raise prices to absorb rising costs.
The Bank of Japan has responded to this and exited the negative interest policy in March, and further raised the policy rate to 0.25% in July. We believe the Bank of Japan is expected to continue to normalise the policy towards 1.0%, although the pace of the normalisation and where it will end are still uncertain and will be data dependent.
The faster wage growth has encouraged domestic investors to revisit their home asset class, driven by a stronger outlook, reasonable valuations, higher yields and a compelling corporate reform. This can be clearly seen in recent data on the Nippon Individual Savings Account (NISA). The NISA programme offers individuals tax exemptions on capital gains and dividends. Roughly half of the money has been invested in Japanese equities so far in 2024. At the current rate, Japanese individuals will invest approximately over 5 trillion yen ($33 billion) in the Japanese equities market in 2024. Changes made earlier in the year by the government, increasing the amounts invested and confirming the tax exemption status indefinitely are likely to help support demand moving forward.
The surge in household investments under the NISA programme can also be attributed to rising inflation expectations. We think the end of deflation is likely to boost consumer confidence and add to future demand for domestic investing.
The corporate sector is likely to respond to these expectations as well. In a deflationary environment, delaying investments made sense due to anticipated falling costs, but this is no longer the case. Domestic corporate capital expenditure has been rising steadily in recent years, driven by the need for productivity improvements and onshoring/friend-shoring efforts, such as Taiwan’s TSMC building semiconductor fabrication plants. We believe this is also due to rising inflation expectations.
On the other hand, some businesses will face significant pressure on profit margins as costs, particularly wages, rise. For example, labour intensive sectors, such as retail and services, will feel this pressure more than most. However, companies like Fast Retailing (Uniqlo) where there is a strong focus on improving productivity should be winners within the sector. As active managers, we are able to put more focus on those companies that are improving productivity through digitalisation, AI and other measures. Consequently, the gap between winners and losers, in terms of pricing power and the ability to improve labour productivity, will likely widen in the future.
Exhibit 8: Upgraded NISA program: promoting a shift from savings to investments
Source: JPM CIB Research, Japan Securities Dealers Association. Data as of 31 March 2024. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met.
Investing in Japan in 2025: What are the risks?
The Japanese market remains heavily leveraged to the global cycle and any concerns about global growth will ultimately weigh heavily on it. Along with this, the direction of the currency remains one of the most frequently asked questions in our conversations with clients. With approximately 40% of corporate profits made outside Japan, a strong JPY is negative for earnings and for the market. That being said, the sensitivity of earnings to the exchange rate has declined over time. The sensitivity to USDJPY has declined from ~10% (i.e. 10% JPY appreciation reduces the profit by ~1%) to ~5% today. The consensus forecast for FY2024 and 2025 is based on the USDJPY assumption of around 145. Our analysis shows the aggregate profit level will be higher than where it is today even if USDJPY appreciates to 135, with everything else being equal.
Politics and geopolitical issues have been dominating news globally, and Japan has remained a beacon of stability. However, recent events in Japan have tested this after the ruling coalition between Liberal Democratic Party and Komeito lost the majority in the lower house election in October. However, this is unlikely to have a material impact on policy given all three main opposition parties (Constitutional Democratic Party of Japan, Democratic Party for the People and Japan Innovation Party) are not radically different from those of the ruling coalition. All combined, we are likely to see higher fiscal spending in 2025 which will provide additional support for the economy. In addition, there will be another election in July 2025.
Opportunities in the Japanese equity market
While the backdrop has undoubtedly improved for Japan now offers a multi-year opportunity, foreign investors which we believe grapple with the best way to gain exposure to the market. Global and Asia Pacific regional managers are still broadly underweight Japan and predominantly focused on the larger parts of the market. Given the breadth and depth of the Japanese market, there are a wealth of opportunities that fall outside the usual large index names.
The Japanese equity market remains one of the most under covered developed markets. This inefficiency creates a fertile opportunity for active managers and particularly those that have the focus and resource to delve deeper into the Japanese universe of companies.
Style has been a major driver of returns in the last decade, with strong rotations between value and growth leading the market. Growth led for the few years prior to Covid and in 2020, but since then we have seen value significantly outperform. Value, using Russell Nomura Total Value Index as its proxy, is 45% (cumulative) ahead of growth over 10 years to the end of December 2024. Sourced from Bloomberg Data as of 16 January 2025. As a result, the valuation spread between the two groups has narrowed. Our own internal 5-year expected return signal indicates the spread is narrow, which means that going forward stock selection is likely to be a bigger driver of returns, rather than style.
Without any clear signals for any particular style leadership, we believe that style is unlikely to be a big driver of returns in the next part of the cycle, with growth, value and core managers all being able to benefit. Bottom up stock selection will be key in identifying good companies trading on reasonable valuations. The most important factor investors should be focusing on is fundamentals!
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 may not necessarily be all-inclusive and may be subject to change without reference or notification to you. 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 a reliable indicator of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, there can be no assurance that the investment objectives of the investment products 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. As the product may not be authorised or its offering may be restricted in your jurisdiction, it is the responsibility of every reader to satisfy himself as to the full observance of the laws and regulations of the relevant jurisdiction. Prior to any application investors are advised to take all necessary legal, regulatory and tax advice on the consequences of an investment in the products. Shares or other interests may not be offered to or purchased directly or indirectly by US persons. All transactions should be based on the latest available Prospectus, the Key Information Document (KID) and any applicable local offering document. These documents together with the annual report, semi-annual report, instrument of incorporation and sustainability-related disclosures, are available in English from JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg, your financial adviser or your J.P. Morgan Asset Management regional contact or at www.jpmorganassetmanagement.ie. A summary of investor rights is available in English at https://am.jpmorgan.com/lu/investor-rights. J.P. Morgan Asset Management may decide to terminate the arrangements made for the marketing of its collective investment undertakings. Units in Undertakings for Collective Investment in Transferable Securities (“UCITS”) Exchange Traded Funds (“ETF”) purchased on the secondary market cannot usually be sold directly back to UCITS ETF. Investors must buy and sell units on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units and may receive less than the current net asset value when selling them. In Switzerland, JPMorgan Asset Management Switzerland LLC (JPMAMS), Dreikönigstrasse 37, 8002 Zurich, acts as Swiss representative of the funds and J.P. Morgan (Suisse) SA, Rue du Rhône 35, 1204 Geneva, as paying agent. With respect to its distribution activities in and from Switzerland, JPMAMS receives remuneration which is paid out of the management fee as defined in the respective fund documentation. Further information regarding this remuneration, including its calculation method, may be obtained upon written request from JPMAMS. This communication is issued in Europe (excluding UK) by JPMorgan Asset Management (Europe) S.à r.l., 6 route de Trèves, L-2633 Senningerberg, Grand Duchy of Luxembourg, R.C.S. Luxembourg B27900, corporate capital EUR 10.000.000. This communication is issued in the UK by JPMorgan Asset Management (UK) Limited, which is authorised and regulated by the Financial Conduct Authority. Registered in England No. 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.