Jay Smith @jaynemesis: "𝐉𝐚𝐩𝐚𝐧: 𝐍𝐞𝐰 𝐌𝐚𝐫𝐤𝐞𝐭, 𝐍𝐞𝐰 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 //𝘗𝘢𝘳𝘵..."

United Kingdom

𝐉𝐚𝐩𝐚𝐧: 𝐍𝐞𝐰 𝐌𝐚𝐫𝐤𝐞𝐭, 𝐍𝐞𝐰 𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 //𝘗𝘢𝘳𝘵 𝟣 𝘰𝘧 𝟤 - 𝘚𝘦𝘦 𝘤𝘰𝘮𝘮𝘦𝘯𝘵𝘴 𝘧𝘰𝘳 𝘗𝘢𝘳𝘵 𝟤 𝙄𝙣𝙩𝙧𝙤 eToro recently added Japanese stocks to the platform, and it’s opened up some names I’ve been following for a while but never had access to. The Japanese market is often overlooked, once a booming economy dominated by tech. These days investors think about the huge national debt, aging population, and an extremely weak currency. This all being said, I still think Japan has some great businesses worthy of investment. 𝙉𝙚𝙬 𝙈𝙖𝙧𝙠𝙚𝙩 Back in around 2019/2020, eToro asked me at an event which markets or assets I would most like to see added to the platform. At the time, I was deep into researching the EV, Electrical Hardware and Heat pump/HVAC markets as part of my broader core theme: Electrification. EVs were still dominated by Tesla, but China was ramping rapidly, so they were a consideration. I identified Hyundai and Kia as better options though, putting South Korea on my wish-list. They came up again for Heat pumps/HVACs with Samsung and LG, but Japan topped this list with $6367.T (Daikin Industries Ltd.) and $6503.T (Mitsubishi Electric Corp.) - the two biggest players in Heat pumps globally. In Electrification, both South Korea and Japan came up again, the former still growing into the market, but Japan is the established name, with $6501.T (Hitachi Ltd.) positioned as a global leader in grid infrastructure and $6503.T positioned well too. My response to eToro: “𝘗𝘭𝘦𝘢𝘴𝘦 𝘢𝘥𝘥 𝘑𝘢𝘱𝘢𝘯 𝘢𝘯𝘥 𝘚𝘰𝘶𝘵𝘩 𝘒𝘰𝘳𝘦𝘢 𝘢𝘴 𝘴𝘰𝘰𝘯 𝘢𝘴 𝘺𝘰𝘶 𝘤𝘢𝘯!” 𝙉𝙚𝙬 𝙍𝙞𝙨𝙠𝙨 As mentioned in the introduction though, the Japanese market comes with some risks and downsides. The biggest by far is currency risk. The Japanese Yen is known for being weak, originally it was a deliberate method of fighting deflation. Recent attempts to raise interest rates by the Bank of Japan resulted in market turmoil because of “Carry Trades”. Investors borrowed Yen, converted to different currencies and invested it, with the plan to pay it back at near-zero interest. When rates increased the currency strengthened, making it more expensive to pay back and in many cases there would be additional interest. This has essentially left the Bank of Japan trapped, they need to increase very slowly, or they could cause huge issues in financial markets. The end result is that even if a Japanese stock is up 25% in a year, a lot of it will be offset if the value of the Yen has fallen by 10% against major currencies. Japanese companies also tend to be huge sprawling monsters. Nissan, Mitsubishi, Toyota, etc have such vast businesses with a huge range of products that it’s hard to get exposure to just 1 core theme. The structure of the companies is often complex, and ownership is even worse, with companies owning major stakes in rivals creating a web of systemic and contagion risk. The picture has been improving for a few years now, but it’s something to be aware of when looking at Japanese companies. //𝘌𝘯𝘥 𝘰𝘧 𝘗𝘢𝘳𝘵 𝟣 𝘰𝘧 𝟤 - 𝘚𝘦𝘦 𝘤𝘰𝘮𝘮𝘦𝘯𝘵𝘴 𝘧𝘰𝘳 𝘗𝘢𝘳𝘵 𝟤

Not investment advice. The author may have financial interests in the mentioned instruments.