End of deflation foreshadows a bright future for Japanese equities
|22 May 2012|
As a destination for equity investors, Japan doesn’t appear to offer much to get excited about. It has huge public debts, an ageing population, an ineffectual government and a history of weak corporate governance. Deflation is an additional turn-off - Japanese companies’ decade-long battle against falling prices hardly adds to the country’s investment appeal.
But dig a little deeper, and an altogether different picture emerges, said Adrian Hickey, head of Japanese equities at Pictet Asset Management (PAM).
Corporate Japan is also moving in a positive direction, said Sam Perry, a senior Japanese equity investment manager at PAM. As firms continue to recover from the devastating effects of last year’s natural disasters, corporate earnings are expected to rise by an annual 28% over the next two years, he said. What’s more, companies are also starting to put the large amount of cash they have accumulated over the past several years to more effective use.