Venture: Domestic Japanese Value

Issue 53

Japanese equities had a major peak in 1989 and have been sluggish ever since. That is brought home by comparing them to the world index. On that basis, Japanese equities have been lagging the world since 1988, making yet another relative low (red) last month. Yet, since 1970, they are still 2.5x ahead of the world, but in 1998, that was 25x better. It has been one hell of a lead to give back.

Japanese Equities vs the World including Dividends

Source: Bloomberg

Most of the post-1990 weakness has been caused by falling valuations, as in the 1980s, the Japanese stockmarket was one of the greatest bubbles of all time. These days, valuations are much more attractive, and in small caps, they are dirt cheap. More recently, a weak yen has been holding them back, but with rate hikes over there and rate cuts over here, that is about to change.