Is it time to buy Japan?

14 May 2013

After 20 years of falling prices and a stagnant economy, is Japan finally kick-starting a new era of real economic growth? Massive quantitative easing (QE) measures were announced at the April Bank of Japan policy meeting, with the target of 2% inflation.

The Japanese stockmarket responded enthusiastically, rising around 10% in the week after the announcements were made, while the yen has fallen in value as a result of QE, making Japanese exports look more competitive overseas.

Despite many uncertainties, experts are generally bullish on prospects for Japanese growth – especially with "a large package of reforms and fiscal spending measures," due in June, according to Gary Dugan, chief investment officer for Asia at Coutts.

"GDP forecasts for 2013 have virtually doubled to around 1.2% and the latest measures should mean further improvement ahead," he adds. "It's simple advice – continue to buy Japanese equities."

Where should UK investors look?

Adrian Lowcock, senior investment adviser at Hargreaves Lansdown, suggests GLG Japan Core Alpha. "This fund offers exposure to shares from the cheaper end of a cheap market – at current levels there could be an outstanding long-term opportunity," he says. It's also possible to buy a hedged version of the fund to protect against currency losses if the yen weakens.

Brian Dennehy, director of, believes that hedging is crucial as Japan enters "a currency war" with its regional competitors. "Buy a fund packed with exporter companies and hedged to protect stockmarket gains, such as Neptune Japan Opportunities," he recommends.

Fund managers tip the US for 2013

Global equity markets have started 2013 strongly, but a Fidelity survey of 13 leading fund groups shows most managers are tipping the US as star performer of the year.

  • Jacob de Tusch-Lec, Artemis: "We believe in a self-sustaining US economic expansion. We're playing the US recovery via stocks catering to growth in domestic demand."
  • Richard Lewis, Fidelity Worldwide: "The US looks set to perform very strongly this year. One key driver is the shale gas revolution, which is helping to re-industrialise the US."
  • Gary Potter, F&C multi-manager: "One of our investment picks is the US. Quantitative easing and low interest rates, plus the energy revolution, manufacturing renaissance and a pick-up in housing, have provided the ingredients for GDP to accelerate into 2014."

If you share their optimism, funds to check out are Axa Framlington American Growth and Aberdeen's North American Income, which were the American winners in our latest fund and investment trust awards respectively.

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