Three hidden gems from Japan’s overlooked stockmarket
Professional investor Eiji Saito of JPMorgan’s Japan Small Cap Growth & Income fund picks three promising stocks from Japan's vibrant but under-researched stockmarket.
Japan is home to a vibrant yet under-researched stockmarket, where the emergence of a dynamic new generation of companies is creating compelling investment opportunities.
Of the 2,000 stocks in the Topix index, well over 50% are covered by no more than one sell-side analyst, which can lead to pricing inefficiencies. This makes Japan an attractive market for active, bottom-up investors on the ground in Tokyo.
Renova: expanding renewables
Japan is at a very early stage in its transition to greener energy sources. Around one third of Japan’s energy is currently sourced from coal, and it remains heavily reliant on natural gas.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

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
However, the government’s commitment to reducing Japan’s emissions to net zero and realising carbon neutrality by 2050 presents an interesting opportunity. The move to renewables should help reduce dependence on imported fossil fuels. We expect the contribution of wind, solar, biomass and geothermal power to rise significantly.
We believe Renova (Tokyo: 9519), the only Japanese utility focused solely on renewable-energy sources, is particularly well-positioned to lead the expansion of Japan’s renewable-energy industry.
The group operates solar, biomass, and onshore and offshore wind power plants in Japan and has an established track record in both the development and operation of renewable-energy plants.
Bengo4.com: updating the world of work
Many Japanese businesses have been slow to digitalise. IT systems tend to be old and paper-based work is still commonplace across many offices. For example, the culture of hanko – the practice of physically providing a personal stamp rather than a signature – is still widespread, presenting a hurdle to remote working.
However, the pandemic has prompted many Japanese companies to reevaluate their business customs and models to help improve productivity.
Against this backdrop, we believe the Japanese digital-contract market has significant growth potential. According to current forecasts, the total market could reach ¥400bn (£2.6bn) over the longer term, with substantial growth on the cards over the next five to ten years.
Bengo4.com (Tokyo: 6027) is a pioneer and market leader in this field, providing cloud-based digital certification services through CloudSign – the equivalent of DocuSign – as part of its product range. At present Bengo4.com boasts an 80% market share of registered companies.
BASE : Japan’s Etsy
Japan has also been slow to transition to online shopping, with the e-commerce market still only comprising 8% of sales. Nevertheless, the pandemic has driven many retail businesses online, and we have seen an increase in demand as consumers embrace online shopping on a more permanent basis.
BASE (Tokyo: 4477), similar to Etsy in the UK and US, provides an e-commerce platform for smaller companies and individuals. It is a quality company well-positioned to meet the rising demand for online retail platforms.
It helps users set up online stores quickly and easily without incurring fees, and has continued to perform well despite volatile market conditions.
Eiji Saito is lead investment manager at the JPMorgan Japanese Smaller Companies Trust.
-
Who is the richest person in the world?
The top five richest people in the world have a combined net worth of $825 billion. Who takes the crown for the richest person in the world?
By Vaishali Varu Published
-
Top 10 stocks with highest growth over past decade - from Nvidia, Microsoft to Netflix, which companies made you the most money?
We reveal the 10 global companies with the biggest returns since 2013. One firm has posted an astonishing 9,870% return, meaning a £1,000 investment would now be worth almost £82,000.
By Ruth Emery Published
-
Crypto is “Monopoly money”
FTX won't be the last crypto scandal, because cryptocurrencies mirror the worst aspects of the finance industry.
By Alex Rankine Published
-
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
By Dr Matthew Partridge Published
-
Can Lidiane Jones be Bumble's perfect match?
Dating app Bumble is taking on Lidiane Jones, a well-regarded leader in tech, as its new boss. Can she work her magic in a new arena?
By Jane Lewis Published
-
Are corporate bonds a good bet?
Corporate bonds pay a slightly higher yield than governments, but spreads aren’t generous by past standards.
By Cris Sholto Heaton Published
-
SoftBank’s shares slump on quarterly loss
Japanese investment group SoftBank’s technology funds have struggled, not least because of an investment in WeWork.
By Dr Matthew Partridge Published
-
M&S shares shift from frumpy to fabulous as pre-tax profits are up by 56%
M&S is performing strongly and has announced it will pay a dividend for the first time since the pandemic.
By Dr Matthew Partridge Published
-
The rise and fall of Sam Bankman-Fried – the “boy wonder of crypto”
Why the fate of Sam Bankman-Fried reminds us to be wary of digital tokens and unregulated financial intermediaries.
By Jane Lewis Published
-
Three defence stocks set to flourish in an era of instability
A professional investor tells MoneyWeek where he’d put his money. Tom Bailey highlights three defence stocks that look promising.
By Tom Bailey Published