Big in Japan!!!

Japan’s Economic Renaissance

In our journey as Financial Planners and Wealth Managers, we’ve always championed the importance of a well-rounded investment approach, underpinned by our five key principles:

  • geographical and sector diversification
  • multi-asset portfolios
  • varied investment strategies
  • balance between active and passive investments.

Our Managing Director, Andy Brooks, has previously highlighted the significant influence of the ‘magnificent 7’ big tech companies on the US markets. Today, however, we turn our gaze towards the East, to Japan, a country that is demonstrating why geographical diversification in investments is not just important but essential.

For decades, Japan was perceived as a ‘value-trap’, where stocks were undervalued and expected to remain so. However, this narrative is changing rapidly. On the 22nd of February, after more than 34 years, the Nikkei 225 index reached new all-time highs, signaling a potential sea change in the global investment landscape. This resurgence is attributed to a combination of regulatory reforms, a revitalised economy, and shifting global market dynamics, all converging to create a fertile ground for investment in Japanese equities.

The Tokyo Stock Exchange has introduced stringent measures to invigorate the market, pressuring companies to enhance profitability or face the risk of delisting. This has led to an unprecedented level of shareholder-friendly practices, including record-high buybacks and dividend payouts. Moreover, the Japanese government’s initiative to double the tax-free investment allowances for retail investors is a strategic move to bolster the market’s resilience against global economic fluctuations.

Japan’s economic landscape is undergoing significant structural changes, from wage dynamics to demographic trends, indicating a decisive move away from its ‘value-trap’ era. The country’s burgeoning technology sector, particularly in artificial intelligence and semiconductors, positions it advantageously on the global stage, especially in light of US export controls on China. These developments, coupled with the legacy of ‘Abenomics’, have infused the Japanese market with optimism, as evidenced by the Nikkei’s historic performance. The economic revival is not merely a result of favourable currency dynamics; it represents a broader resurgence, with inflation moving positively after years of deflationary pressures.

As Financial Planners and Wealth Managers, we’re observing these developments closely. The record highs of the Nikkei 225 pose an intriguing question for global investors: how much further can Japan’s equity markets grow? With reforms enhancing shareholder confidence and the economy showing signs of sustained growth, Japan’s market trend appears to be on an upward trajectory. While challenges remain, such as changing consumer sentiment and corporate behaviour, the potential for growth in Japanese equities is undeniable.

Recognizing these opportunities, our Investment Managers at LGT have strategically increased our Managed Portfolio clients’ exposure to Japanese equities through the L&G Japan Index. This decision reflects our belief in the potential of global markets, including Japan, to offer valuable investment opportunities.

For those interested in exploring global investment opportunities further, particularly in the revitalised Japanese market, we invite you to reach out. Our team is here to guide you through the diverse investment landscape, helping you make informed decisions aligned with your financial goals.

For more information on our Managed Portfolios and how we can help you navigate the global investment scene, please contact us at:

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  • Phone: 01733 314553
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Japan’s economic renaissance is a testament to the dynamic and ever-evolving nature of global markets. As investors, staying informed and adaptable is crucial to seizing the opportunities that lie ahead.