We think Japan is one of the most attractive markets in the world based on our expectations of return versus risk over the next 12 months.  This view is not consensus.  There are growing doubts about Japan’s commitment to structural reform and worries about the impending consumption tax hike.  These concerns have been reflected in Japanese stocks’ weak start in 2014, especially relative to Europe and the US.  We regard this as a buying opportunity and believe the Bank of Japan, Prime Minister Shinzo Abe, and corporate Japan are seeing the benefits of their commitment to restart growth and end deflation.  Since we expect further yen weakness (see Weekly Chart), we have increased our Japan exposure on a currency-hedged basis.  

David Fuller's view

The Weekly View provides an excellent analysis of Japan which I think will be of interest to many subscribers.

Japan was one of Fuller Treacy Money’s favourite stock markets last year.  What about this year?

Japan is still a preferred investment market for all the reasons discussed last year and summarised in The Weekly View above.  I have the same major concern: Japan’s energy costs are high and will rise further as the yen weakens, without the restarting of nuclear power stations which are not on fault lines.  Shinzo Abe wants to do this but he does not yet have public opinion on his side.