Investing in Japan has rarely been more appealing, according to the manager of the UK’s largest publicly traded Japanese investment trust.

Nicholas Weindling, who oversees the £1.2 billion JPMorgan Japanese fund, suggests that Japan hasn’t been this attractive for investors since he started managing portfolios in Tokyo 22 years ago.

Weindling explains, “Japanese companies have undergone a significant transformation in corporate governance, now prioritizing shareholders and offering dividends.”

He further notes, “We’re witnessing rising wages, an uptick in inflation, and an economy shifting into growth. With company valuations more appealing compared to other nations, particularly the US, Japan stands out as a prime investment destination.”

JP Morgan’s Japanese fund has invested in video game firm Nintendo, home to the famous Super Mario series

In addition, he observes that domestic interest in the stock market is rising, further boosting equity prices.

Over the past year, the trust has delivered a 35 percent return. It holds investments in 60 companies, including well-known global brands such as sports leader Asics, gaming giant Nintendo, and fashion retailer Uniqlo.

‘Asics is winning market share from the likes of Adidas and Nike,’ Weindling says. 

‘Nintendo owns super brands in Super Mario and Pokemon, while Uniqlo is expanding its global footprint, opening stores in Birmingham and Glasgow – it’s Japan’s answer to Zara.’

Uniqlo is opening more stores around the world… it is seen as Japan’s answer to Zara

Footwear brand Asics has been winning market share from global leaders Adidas and Nike

Other dominant investment themes in the fund include defence. Among its top-ten holdings is IHI Corporation, which it bought into nearly two years ago.

Although IHI makes everything from lawn mowers to cranes, it is increasingly focusing its business on manufacturing aircraft engines for Japan’s Ministry of Defence and supplying rocket systems for guided missiles.

Weindling says: ‘Defence is a big investment area for us.’

Another key holding is Mitsui Engineering & Shipbuilding. Banks – a beneficiary of higher interest rates – also feature in the trust, with Mitsubishi UFJ Financial and internet bank Rakuten among its biggest stakes.

The trust draws upon a big team of JPMorgan investment professionals based in Tokyo.

‘There are 4,000 listed companies in Japan,’ says Weindling. ‘Half of those get little coverage from analysts.

‘Our boots on the ground mean we can meet companies face to face and get a real feel of what is going on inside the country.

‘It gives us a good perspective, an edge.

‘Equally, our offices across the world provide us with information that helps us assess those companies competing against the Japanese businesses we own. For example, Adidas and Nike and how they are faring compared to Asics.’

While the recent performance looks good, the trust struggled in the aftermath of Covid, underperforming in 2021 and 2022 as its emphasis on growth stocks backfired in response to a strong pick-up in inflation.

In 2022, the trust recorded losses of nearly 28 per cent, while the Tokyo Stock Price Index lost just 4.5 per cent.

‘We made some mistakes,’ Weindling admits, ‘but we’ve done a lot of work to correct them by repositioning the portfolio.’

With prime minister Sanae Takaichi pursuing a growth agenda – and looking to cement her position by calling a snap election she is confident of winning – he says the future for investors is ‘exciting’.

The trust has low annual charges of 0.46 per cent – keener than the three rival listed Japanese funds managed by Baillie Gifford, Chikara (CC Japan & Income Growth) and Schroders.

Its stock market ticker is JFJ and identification code 0174002.

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