Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended January 2025..
Portfolio Manager Commentary
Japanese stocks eked out modest gains in January, with the performance differential between key indices underscoring the external headwinds faced by exporting companies. Uncertainty about the global economy, including the impact of US trade policies, and the risk of market volatility stemming from an anticipated rate hike by the Bank of Japan (BoJ) weighed on share prices. Market segments that are tied to global trade, notably shipping, trading companies and automobiles, suffered the most significant declines. On the other hand, sectors that benefit from domestic reflation, led by financials, outperformed. At its monetary policy meeting, the BoJ raised its policy rate by 25bps to 0.5%, the highest level since 2008.
The outlook for corporate earnings is less dependent on currency factors and there is the potential for domestic mid-caps to perform. This segment of the market has seen valuation multiples compress to historical lows. Meanwhile, Japan-specific drivers, such as domestic reflation and rising wages, and governance reforms represent multi-year structural trends that are creating new investment ideas. The initial governance charge was led by low price-to-book companies and while most of the low hanging fruit has been harvested, we see greater potential for change among mid-caps and sustainable growth companies.
Over the 12 months to 31 January 2025, the Trust recorded NAV and share price returns of 2.7% and -1.4% respectively, compared to 8.2% for the index.
