GMO argues Japan’s equity opportunity is still intact after strong recent returns because corporate reform, earnings growth, and shareholder focus continue to compound. The paper says Japan trades at a 20% forward earnings discount to the U.S., while small value remains deeply dislocated.
Japan Equities: The Tide Has Turned and It’s Still Rising
GMO
Rick Friedman, John Thorndike
Research
6 Pages
Key Takeaways
Reform Still Compounds: Since GMO’s 2018 Japan call, MSCI Japan compounded at 14.2% annually, with nearly two thirds from fundamental improvements.
Small Value Leads: GMO forecasts 10.5% real returns for Japan small value in U.S. dollars, helped by valuation, reform and yen upside.
Positioning Remains Light: Among 203 EAFE active strategies, 74% were underweight Japan by an average 6.5%, leaving room for reallocation.
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