DIY Investor Magazine
/
2015 Issue
15
“The final months of 2014 delivered many
surprises to investors in Japan. The Bank of
Japan stepped up its monetary stimulus at the
end of October, the massive Government Pension
Investment Fund (GPIF) increased its allocation
to domestic equities and Prime Minister Abe
postponed the next scheduled consumption tax
rise from 8% to 10% to April 2017 from October
2015.
The postponement came as a result of significantly
weaker economic data, with GDP unexpectedly
contracting by an annualised 1.9% in the third
quarter. At the same time, Abe called a snap
election, held on 14 December, which the ruling
LDP and their coalition party safely won with a two
thirds majority of the Lower House.
Looking into 2015, the political focus is expected
to shift towards reforms, especially domestic and
structural reform. Having achieved a strong result
in the election, Abe now looks to be in a robust
position to push through significant and possibly
controversial reform early in the New Year.
There is as yet little indication as to the key
policies the Abe administration is looking to
pursue. However, we would expect news on areas
such as acceleration of Trans Pacific Partnership,
social security reform, labour market reform and
corporation tax cuts.
Corporate earnings in Japan are likely to
continue to improve. Interim results were much
better than was generally forecasted and with
the weak yen, we expect to see companies
continue to grow in the first half of 2015. The
weak currency should also bring many tourists
into Japan, especially from neighbouring
countries such as China, Taiwan and South
Korea. Continuing growth in tourism should
benefit domestic companies such as retailers
and travel companies.
“In addition, Japanese companies continue to
improve shareholder returns. Interim dividends
were at record levels and by the end of
November 2014, the number of companies
buying back their own shares had already
exceeded the total level for the whole of the
previous fiscal year (to March). Japan has also
decided to implement the new “Corporate
Governance Code” in June 2015, which will
require all listed companies to have at least two
external board directors.
With the GPIF and the Bank of Japan buying
domestic equities on a large scale and also
companies buying back approximately ¥3 trillion
of their own shares annually, the dynamics for
the Japanese equity market look attractive for
2015.”
The above commentary represents the views of the Fund Managers at the time of preparation and may be subject to change and this is
particularly likely during periods of rapidly changing market circumstances. Their views are not necessarily those of Jupiter and should
not be interpreted as investment advice. Every effort is made to ensure the accuracy of any information provided but no assurances or
warranties are given. The value of investments and the income from them can fall as well as rise and may be affected by exchange rate
variations. You may get back less than originally invested. ;
JAPAN - SIMON SOMERVILLE, MANAGER OF THE
JUPITER JAPAN INCOME FUND
JUPITER AM FUND MANAGERS
GIVE THEIR OUTLOOK FOR 2015
