Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended February 2025.
Portfolio Manager Commentary
The Japanese equity market lost ground in February, undermined by uncertainty around the Trump administration’s tariff policies, a stronger yen and weakness in US technology-related stocks, which saw the Nikkei 225 touch a five-month low. These factors overshadowed above-consensus GDP data and an upbeat earnings season in Japan. While strengthening domestic wage / inflation data and hawkish comments from BoJ Policy Board Members heightened expectations for additional rate hikes, long-term rates in the US declined due to concerns about the outlook for the economy. With 10-year JGB yields rising to a 15-year high, a shrinking rate differential versus the US saw the yen strengthen beyond the 150 level against the dollar.
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 28 February 2025, the Trust recorded NAV and share price returns of -4.9% and -3.6% respectively, compared to 2.4% for the index.
Fidelity Japan Trust PLC (LON:FJV) aims to be the key investment of choice for those seeking Japanese companies exposure. The Trust has a ‘growth at reasonable price’ (GARP) investment style and approach – which involves identifying companies whose growth prospects are being under-appreciated or are not fully recognised by other investors.
