What Warren Buffett sees in Japan

Robotics group Keyence offers exposure to a major long-term growth trend

(Image credit: An aircraft flying over Keyence headquarters in Osaka © Yuzuru Yoshikawa/Bloomberg via Getty Images )

published 11 September 2020

Not for the first time, Warren Buffett is swimming against the tide, says Mike Bird in The Wall Street Journal. Early this month his Berkshire Hathaway group spent $6bn acquiring stakes in five Japanese trading houses. Yet data shows that other foreigners have been souring on the world’s third-biggest economy.

However, Shinzo Abe, who took office in 2012 and has just resigned, leaves Japan’s markets better than he found them, says The Economist. Lower corporate taxes and a depreciating yen gave a much-needed boost to shaky corporate profits, while reforms to corporate governance have made Japanese managers more responsive to the needs of shareholders. The Topix index has gained more than 82% since he took office. Reforms in Japanese markets have been overshadowed by the dominance of US-listed tech stocks, says Andrew Bary in Barron’s. The country is “more like Germany than the US”, explains Masakazu Takeda of Sparx Asset Management. Japan’s real speciality is its “high-quality industrial businesses”, such as carmaker Toyota and air conditioning supplier Daikin Industries.

The dominance of these sectors has fed a perception that Japan is not a “sexy” investment, Nicholas Weindling of the JPMorgan Japanese investment trust tells Jeff Prestridge in The Mail on Sunday. But there are plenty of exciting growth companies. GMO Payment Gateway, an electronic payment specialist, and robotics business Keyence offer exposure to key secular growth trends. Moreover, on a cyclically adjusted price/earnings ratio of 19.4 the market looks reasonably valued. For British income seekers weary of the FTSE dividend axe, a 2.4% average dividend yield backed up by robust balance sheets looks especially appealing.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Explore More

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.