President
Barack Obama wasn’t the only person to lend his backing to Japan last week,
after he arrived in the country on the first leg of his Asia tour to show
support over a land dispute with China.
Despite
widespread cynicism over the ability of Japanese prime minister Shinzo Abe’s
reforms – dubbed Abenomics – to boost the country’s fortunes, there is both
political and investment
support for the island nation.
Tony
Lanning, manager of JPMorgan’s Fusion range – each product a ‘fund
of funds’ investing in other investment vehicles – says he is bullish on
Japan despite a ‘challenging start to the year’.
Investing in Japan: Fund manager Tony Lanning
has faith and says wage rises are a signal of a turnaround
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He
acknowledges that euphoria over Abenomics has faded, regardless of last year’s
45 per cent rise in the Topix index, which reflects share prices on the Tokyo
Stock Exchange.
Abenomics
follows a ‘three-arrowed’ plan: to print money, aimed at boosting spending and
weakening the yen to boost exports; to spend on construction; and make reforms
and remove barriers that deter private investment.
Experts
are concerned over the effectiveness of the last aim, but Lanning has faith and
says wage rises are a signal of a turnaround.
He
adds: ‘We retain conviction that Japan will reap the benefits of reform and are
encouraged by signs affirming this.
‘Wage
hikes are seen as key to boosting an economy
which has been faced with falling prices for two decades and the recent round
of union wage negotiations saw almost all companies in the
bargaining process agreeing to wage increases, some for the first time since
2001.’
Support: Barack Obama has given Shinzo Abe his backing
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He
manages five funds in the Fusion range – Income,
Conservative, Balanced, Growth and Growth Plus, with an ascending level of
risk. Within Fusion Growth, he highlights Polar Capital Japan and GLG Japan
CoreAlpha as two funds he likes.
The
first has exposure to small and mid-sized companies, while the second focuses
on attractively valued big-cap companies, such as Sony. But a fifth of Fusion Growth is in UK equities and a quarter is
in US shares. And though the percentage invested in Japan has risen, it is
still only 8 per cent of the fund.
Each
Fusion fund has so far performed in line with its risk profile, with higher
returns for higher risks. But as they are only a year old, the funds have yet
to prove themselves against rivals.
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