Man Group makes the case that Japanese equities are a forgotten market despite improving fundamentals and supportive macro conditions. It highlights extreme foreign outflows, depressed valuations versus history, and corporate reforms that could unlock shareholder value, challenging the view that Japan remains structurally stagnant.
Japan: Opportunities in the Forgotten Equity Market
Man Group
Teun Draaisma
Research
4 Pages
Key Takeaways
Valuation Gap Opportunity: Japan’s CAPE ratio sits far below its 1989 peak of 100x, while the market now represents just 8% of MSCI World versus 45% at the bubble peak.
Foreign Selling Extremes: Overseas investors sold roughly 6 trillion yen of Japanese equities in 2018, marking the largest net outflow in 30 years and signaling potential contrarian opportunity.
Corporate Reform Momentum: Governance improvements and balance sheet changes are driving higher ROE, with cash-heavy firms increasingly deploying capital after decades of conservatism.
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