Japan takes a small step towards post-pandemic reopening
Foreign students and business travellers will be allowed in to Japan from next month, although tourists will remain barred for now.
![Japanese people banging Japanese drums](https://cdn.mos.cms.futurecdn.net/iFiKVsqELUAdLGVH9C4o9L-415-80.jpg)
Japan is open for business again. The country’s borders have been sealed for long periods during the pandemic, but last week Tokyo announced that foreign students and business travellers will be allowed in from next month, say Wataru Suzuki and Francesca Regalado for Nikkei Asia. Quarantine rules will also be eased, although tourists remain barred for now. The announcement follows public pressure from business groups and universities. The border measures have deterred foreign investment and encouraged talent to head elsewhere.
Meanwhile, the benchmark Topix stock index has recovered from its Covid-19 slump and trades 8% above pre-pandemic levels. However, it has followed other world markets lower this year and entered a technical correction (defined as a 10% fall from a recent peak) last month.
Ready for prime time
Back in the 1980s the Tokyo market was a behemoth, accounting “for some 40% of the world’s stockmarket value”, says Suryatapa Bhattacharya in The Wall Street Journal. Yet things went south at the end of that decade and today it ranks behind bourses in New York, Europe and China in terms of market capitalisation. About half of stocks listed in Tokyo trade for “less than their book value”, a sign that investors have little faith in the ability of managers to create value. Japanese blue-chips have long been accused of “sitting on cash and stagnating”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
![https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg](https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748-320-80.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
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Tokyo Stock Exchange is trying to shake up that image with “the biggest overhaul in 60 years”. It wants to create a new elite section called “Prime”, with stricter rules for members about independent directors and communications with investors. However, loopholes in the new rules mean critics think the changes amount to little more than “window dressing”.
Small is beautiful
Still, corporate reforms over the past decade have started to make a difference, says Max Godwin of Eastspring Investments. “Deleveraging of balance sheets, rising dividend payouts, stock buybacks” and more “contested takeovers” are all positives for investors. Perhaps most intriguing are smaller stocks, which are less heavily covered by analysts and make up about two-thirds of the investment universe. With “undemanding valuations”, the “small- and mid-cap space is prime territory for longer term valuation-driven stock pickers”.
Business confidence is strong, as evidenced by “share buyback activity at a ten-year high” and strong “capital expenditure levels”, adds Mary McDougall in the Investors’ Chronicle. Valuations are attractive, with the MSCI Japan trading on a 12-month forward price-to-earnings ratio of 15, compared to the developed-market average of 19.5. Investors in Japan have learnt from bitter experience not to get too excited, but “there are reasons to be cautiously optimistic for 2022”.
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
-
Regulator moves to protect access to cash amid branch closures and disappearing ATMs
News The Financial Conduct Authority has told banks to start assessing if local communities have adequate cash access from mid-September
By Marc Shoffman Published
-
VAT hike on private school fees could come earlier than previously expected
The government could start charging VAT on private school fees as soon as January 2025, according to the latest reports. What does it mean for parents?
By Katie Williams Published
-
UK mid-caps: an improving outlook
UK mid-caps have perked up and the rally may run further, but long-term investors should remain selective
By Cris Sholto Heaton Published
-
The tobacco industry is going smoke-free - how to profit from it
Tobacco companies have realised their traditional products are on the wane. But new opportunities have opened up – and should prove lucrative
By Rupert Hargreaves Published
-
Is it time to invest in creative industries?
Any industrial strategy should not overlook the creative industries, one of our top national assets
By David C. Stevenson Published
-
Is Mercia Asset Management set for success?
Mercia Asset Management helps the government fund smaller companies in Britain’s regions. Should you invest?
By Rupert Hargreaves Published
-
British stocks set for a boost
British stocks are due for a bounce as the UK looks more stable compared to many economies
By Alex Rankine Published
-
Ocado shares jump by a fifth
Ocado takes a turn for the better after attractive profit forecasts were announced
By Dr Matthew Partridge Published
-
The AI boom is on borrowed time
The hype around the AI boom could be on its way out – but why?
By Alex Rankine Published
-
Diploma: a blue-chip set for strong growth
Diploma, whose niche products include seals and fasteners, serves an array of growth markets. Should you invest?
By Dr Mike Tubbs Published