Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended May 2025.
Portfolio Manager Commentary
Japanese equities advanced in May, buoyed by a combination of external tailwinds, and renewed global risk appetite. The uptrend, which came in tandem with gains across major markets, was underpinned by signs of easing in US trade policy, robust earnings from technology firms and a weakening of the yen from April’s high. Market leadership rotated decisively toward cyclical and growth-oriented names. High-beta, high-returnon-equity stocks outperformed, as did small-cap growth shares. Factor performance reflected a pronounced risk-on tone, with reversal strategies delivering gains. Conversely, more defensive, and domestically focused areas of the market lagged. Foreign investors were net buyers of Japanese cash equities, with flows suggesting a structural reallocation rather than a short-term tactical shift.
In the current environment, there is the potential for domestic mid and small caps to outperform against a backdrop of heightened external risks, centred on US trade policies. Valuation multiples have already compressed to historical lows and this segment of the market is relatively resilient to tariff uncertainty. Meanwhile, Japan-specific drivers, such as domestic reflation and rising wages, and governance reforms represent multiyear structural trends that are creating new investment ideas.
Over the 12 months to 31 May 2025, the Trust recorded NAV and share price returns of 4.6% and 6.9% respectively, compared to 6.5% for the index.
Fidelity Japan Trust PLC (LON:FJV) aims to be the primary investment choice for those seeking exposure to Japanese companies. The Trust employs a ‘growth at a reasonable price’ (GARP) investment style and approach, which involves identifying companies whose growth prospects are being undervalued or are not fully acknowledged by other investors.
