Fund of the week: a punt on the Japanese consumer

It's been a good two months for Japan's Nikkei 225. The index has climbed 15% over the past seven weeks, partly down to investor hopes that the world's third-largest economy might be able to ride out the worst effects of the global credit crisis. And with the market still two-thirds below the peak it hit in the late 1980s, there's a long way to go, says Simon Somerville, manager of the Jupiter Japan Income Fund.

"The Japanese market is cheap. Something like 50% of companies are trading below their book value" says Somerville in The Independent. Investing in stocks with a largely domestic focus, the Durham University economics graduate avoids the 10% or so of Japanese companies dependent on the global economy because they are more vulnerable to weakening consumer demand in the West. For example, Sony's share price has fallen 23% so far this year, he tells the FT.

Instead, many of the fund's 41 holdings are set to benefit from rising spending among Japanese consumers. The largest holding is NTT DoCoMo, Japan's biggest mobile-phone provider. Somerville has also bought into infrastructure plays such as East Japan Railway Co. The current dividend yield on the fund is 1.5%, but that is likely to grow he tells The Daily Telegraph, as Japanese dividends are rising by 20% a year. The fund, which is down 2.81% over the past 12 months, is up 7.68% over the past three months, against 4.38% for the Nikkei.

MoneyWeek

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Jupiter Japan Income Fund top ten holdings

Name of holding, % of assets

NTT DoCoMo Inc, 5.31

East Japan Railway Co, 5.09

Sumitomo Trust & Banking Co, 4.86

Nippon Commercial Investment Corp U, 3.79

Astellas Pharma Inc, 3.65

Nintendo Co, 3.36

Mitubishi Corp, 3.36

JFE Holdings Inc 3.32

Daiwa Securities Group Inc, 3.23

Seven & I Holdings Co Ltd, 3.19

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