IE poll: Tentative optimism on Japanese recovery, short term hit expected

Investors in Japan are more likely to see short term than long term hits to their returns, InvestmentEurope’s latest poll reveals, with experts tentatively optimistic the country’s economy will be able to bounce back from the combined effect of its recent earthquake, tsunami, and radiation scares.

A majority of those polled, 60%, felt a short term hit to returns on investments in Japan was likely, while 17% thought there will be a longer term impact. But 23% expected there to be both a long and short term effect on returns.

Charles Beazley, Nikko Asset Management’s head of its international and institutional business, who is based in Tokyo, said the results reflected “what we sense is the case in the marketplace here as well”.

Sendai, the worst-affected region, is relatively agrarian, said Beazley, whereas Japan’s great industrial heartlands were not affected at all.

In Fukushima, he said there will be a short term hit, not because of radiation but due to the shortage of electricity.

Opportunities will arise out of the restructuring and rebuilding process however, he argued. Not only will devastated housing need replacing, but M&A activity is likely to be triggered within certain sectors.

“It may have provoked a catalyst for changes people would like Japan to go through, spurring growth and domestic demand,” Beazley said.

“But Japan tends to change slowly, in a way that often doesn’t meet the approval of Western investors’ eyes,” he added. Japanese companies are criticised for their lack of transparency, information and shareholder activism, he said.

In a perverse way, Japan is also getting noticed again by the international investment community, said Beazley.

“People internationally want to invest in the recovery,” he said of a recent trend.

“In the last 20 years, the best way to make money out of Japan as an international investor was to ignore the place,” he said. Investors forgot about the companies and products Japan offers, he argued, whereas since it underwent crisis people have been reminded.

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