We overweight consumer goods firms in our Japanese equities portfolio and would view an indiscriminate sell-off as an opportunity to buy quality companies at discounted prices.
But more than that, in Japan it pays to be long term. We favor firms with a strong brand and dominant industry position. They enjoy pricing power—an ability to raise prices in response to rising material costs but not hurt sales—and are well-placed to seize on structural tailwinds.
We think trends such as electrification and digital interconnectivity are here to stay, as are the needs of an ageing population and demand for quality manufacturing and automation in China.
Investors prepared to do their homework can find opportunities. We have found positive stories in sectors ranging from cosmetics and technology to manufacturing.
Allied to that, we actively engage the managements and boards of companies we invest in. We are firm advocates that shareholder returns can be improved, and we are seeing more holdings raise payout ratios and improve their capital management.
We believe good governance, company performance and sound capital management are closely linked. Such improvements can make Japan a materially better market for investment and help to unlock the tremendous value on companies’ overcapitalized balance sheets.
Govinda Finn is a Japan and developed Asia economist for Aberdeen Standard Investments and Kwok Chern-Yeh is manager of the Aberdeen Japan Equity Fund.