Principal Asset Management Thailand is encouraging investors to increase their exposure to Japanese equities, citing a rare combination of structural reforms, the end of Japan's decades-long deflationary era, and a new wave of economic stimulus from the Sanae Takaichi-led government.According to Principal chief executive Jumpon Saimala, Japan's equity market is benefiting from four major long-term drivers that are reshaping the country's investment landscape.
First, Japan is undergoing significant structural reforms aimed at improving capital efficiency and corporate governance. These reforms have led companies to focus more aggressively on shareholder returns, resulting in higher returns on investment (ROI), stronger profitability, and record levels of share buybacks.
Second, the country's prolonged deflationary environment appears to have ended, allowing companies to regain pricing power for goods and services. The shift has contributed to a meaningful recovery in corporate earnings and return on equity, while Japanese companies continue to demonstrate stronger balance sheets than many of their counterparts in the US and Europe.
Japanese firms are also delivering solid earnings per share (EPS) growth alongside rising dividend payouts, reinforcing confidence in the long-term outlook for the market, Mr Jumpon said.
