Disclosure – Non-substantive Research
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour.
If there is one way in which Japan leads the world it is in “Japanification”. That is - it effectively invented it! The concept of “secular stagnation” is the contention that the developed world is entering a period of systemically lower growth and lower inflation in comparison to past decades.
One way of characterising “secular stagnation”, is that it is the outcome of similar pressures which the Japanese economy suffered in the 1990s and 2000s. The most important of these is demographic decline, while Japan also suffered a huge boom and bust which left “zombie” companies with high amounts of leverage and limited long-term viability, keeping GDP growth below its potential due to entrenched inefficiencies.
In our view, Japanese companies have developed strategies and technologies which have the potential to become crucial for those in countries following it down this path. In this piece we consider the attractions and dangers of a long-term allocation to Japan and discuss why adding to exposure now, in a contrarian fashion, might be prudent. We also assess some of the more attractive trusts exposed to this opportunity.
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