Solid long-term value in Japan, says Morant Wright

Japan’s stockmarket remains attractively priced on a long-term basis, trading around book value according to Morant Wright.

In the latest results for the group’s Japan Income trust, the team—which recently added ex-Schroders veteran Denis Clough—noted the prospective yield on the market is now 2%, much higher than the 1.1% available from government debt.

Over the first half of 2010, the trust saw its net asset value drop 3.7% against a 7.3% decline from the Topix index.

During the period, the market rose steadily in the early months, with the Topix hitting a high of 999 on April 15, but international concerns have dominated since. 

“Exports have continued to lead the way but there has also been an improvement in the domestic economy,” adds the group.

“Deflation remains a concern and the Bank of Japan’s policies are under intense scrutiny. It is forecasting a return to inflation in the fiscal year to March 2012 but other commentators are more sceptical. The government’s recent paper outlining the long-term prospects for the economy is looking for nominal growth of 3% comprising real growth of 2% and inflation of 1%.” (article continues below)

On the corporate side, the Japanese specialist notes companies have largely reported results ahead of expectations for the year ending March 2010 and are forecasting a further significant improvement this year. 

“Costs have been cut sharply, both through a reduction in labour and by rationalisation of plants,” adds Morant Wright.

“Although dividends were reduced in 2009, there is optimism they will rise again this year as companies have strong balance sheets and cashflow is good.”