Should advisors chase Japanese stocks in 2024?

Should advisors chase Japanese stocks in 2024?
A double-digit drop in the yen has helped fuel an impressive run in Japanese stocks so far in 2023.
NOV 30, 2023

Is now the time for advisors to get big, or perhaps bigger, in Japan?

A 13% drop in the Japanese yen year to date has helped fuel an impressive run in Japanese stocks so far in 2023. The widely held, non-hedged iShares MSCI Japan ETF, for instance, has returned over 14% since the start of the year, while the iShares Currency Hedged MSCI Japan ETF is up a gobsmacking 36%.

Aside from the weakening currency, which boosts not only Japan’s exports but also its tourism industry, Japanese equities were also blessed by Berkshire Hathaway CEO Warren Buffett last spring when he visited the country and announced he was raising his stakes in five of its top trading houses to 7.4%. The firms are Misubishi Corp., Mitsui & Co., Itochu Corp., Marubeni and Sumitomo.

The so-called "Oracle of Omaha" first acquired stakes in these firms in August 2020, in an initial purchase worth about $6 billion.

Neil Hennessy, CEO of Hennessy Advisors, says owning Japanese stocks with the yen trading around 150 to the dollar should be an easy and obvious trade because of the effect on the price of Japanese goods. The non-hedged Hennessy Japan Fund is up almost 17% thus far in 2023.

“How can you not buy quality products at a cheap price? That's just a given,” Hennessy said. “If you miss that trade, then you shouldn't be investing at all.” 

From a macro perspective, Masa Takeda, portfolio manager for the Hennessy Japan Fund, added that signs of sustainable inflation — a positive in Japan, unlike in the U.S. — are finally evident in the country. Moreover, from a corporate level, Takeda said Japanese companies are “striving for better labor productivity” and will “introduce more merit-based compensation systems in order to push through continued wage hikes.”

Robert Pearl, co-founder and wealth advisor at G&P Financial, likes the fact that Japan is a “massive, developed economy with a lot of innovation,” as opposed to an emerging market nation, which he views as more risky heading into 2024.    

Pearl says his two preferred international investments are iShares Core MSCI Total International Stock ETF, which has about 15.5% of its assets in Japanese stocks, and the Schwab International Equity ETF, which has a larger allocation of around 21.7%.

Despite the amazing stock run in land of the rising sun, Brandon Opre, financial advisor at TrustTree Financial, has no plans to jump in now because he believes that “chasing performance” is usually a losing proposition.

“I have all my clients in some international exposure, including emerging markets, the broader EAFE and Asia ETFs, but not specifically targeting any one country over another,” Opre said.

Eric Amzalag, CEO and founder of Peak Financial Planning, believes that the huge 2023 advance in Japanese equities means there will be less potential gains going forward. In his view, Japan won't be a lucrative investing destination until there is a correction.

“Investing heavily there at the moment would be a performance-chasing exercise. Basically the window was missed until there is some sort of correction,” Amzalag said.

Direct indexing, ETFs and target-date funds on the rise, Schwab strategist says

Latest News

Roughly three-fifths of Americans agree on higher taxes for large corporations, higher-income households
Roughly three-fifths of Americans agree on higher taxes for large corporations, higher-income households

Pew survey reveals slight majority consensus on tax rates, but views splinter based on political alignment and income levels.

The Fed's going to cut rates
The Fed's going to cut rates

While the Federal Reserve's decision to hold interest rates steady in March was widely expected, it's the reactions from financial professionals that provide a more nuanced picture of the central bank's approach.

Ontario Pension Fund revamps PE business in light of global risk
Ontario Pension Fund revamps PE business in light of global risk

The pioneering member of Canada's Maple Eight is stepping back from its go-it-alone private equity approach as a drought in deals and Trump's trade war prompt a rethink.

Raymond James, RBC reel in UBS advisors managing over $690M in assets
Raymond James, RBC reel in UBS advisors managing over $690M in assets

The firms' latest additions in Florida and Nevada come as a strategic change at UBS raises risk of advisor defections.

Assetmark debuts new advisor succession planning program
Assetmark debuts new advisor succession planning program

The new program offers opportunities and events structured for rookies, next-gen advisor leaders, and soon-to-exit veterans.

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies