Japan Equities: The Tide Has Turned and It's Still Rising

Japanese equities offer significant upside potential driven by structural corporate reforms and attractive valuations, particularly in the small-cap value segment. Despite recent strong returns, the market remains undervalued relative to global peers and supported by improving fundamentals.

Key Takeaways

• 1.Corporate reform momentum is accelerating, resulting in higher ROE and shareholder returns through improved operational discipline and governance.
• 2.The undervalued yen provides a 'two ways to win' scenario: supporting exporter earnings and offering currency appreciation potential for unhedged investors.
• 3.Japanese small value stocks represent a significant dislocation, trading at deep discounts (38%) to the broader market and historical norms.

Table of Contents

• Executive Summary
• Japan’s Improvements Are Durable and Impactful
• Japan Snaps Back
• Why Japanese Equities Still Look Compelling
• Capitalizing on the Opportunity: Be Selective and Active
• Conclusion: The Opportunity Remains Intact

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