While many of the headlines and much of the markets’ focus related to Asia seem to revolve around the potential threat from North Korea or the ongoing trade dispute between the United States and China, the importance of Japan on the global stage cannot be overstated. Indeed, Japan will be in spotlight as it hosts the G20 at the Osaka summit June 28 for the first time. Concurrent with the Summit meeting, the Finance Ministers and Central Bank Governors’ Meeting, the Foreign Ministers’ Meeting, and other ministerial meetings will also be held at eight different locations throughout Japan.
Japan’s official government site succinctly captures the message it plans to project:
“During its presidency of the G20 Summit, the Japanese government is determined to carry out strong leadership in advancing discussions toward resolving the myriad issues now facing the international community.
At the same time, the G20 Summit is a perfect opportunity for people from all over the world to see and experience not only a newly revitalized and transforming Japan—which is thanks to booming corporate profits and a wave of inbound investment as a result of bold regulatory reforms and other stimulus measures—but also the wide-ranging appeal of the various regions that will host these consequential discussions.”
Japan’s commitment to economic development can be seen in the increased use of technology to save labor as its businesses cope with a labor shortage. Unemployment has been very low in this country that has seen it population decline. In addition, there are signs that the immense amounts of capital locked up in Japanese companies are being used to expand globally through acquisitions. While its economy has been cooling since the robust growth it recorded in 2017 (and, in fact, those conditions may continue into 2020), the situation could quickly swing more positively under the any of the following circumstances:
- continued support by the central bank;
- continued strong growth in the number of international travelers to Japan;
- resolution of the US-China trade issues;
- securing a positive Japan – US free-trade agreement now that a free trade agreement with the EU has been secured; and
- increasing foreign earnings by Japanese companies
Japan’s increased assertion of leadership on the global stage extends beyond economic development and its G20 Summit host role. Given the uncertainty in region, Japan is upping its commitment to national and regional defense. Most notably, as announced by President Trump during his recent state visit to Japan, the country announced plans to purchase 105 US-made F-35 stealth aircraft. That purchase would give Japan the largest F-35 fleet of any US ally, according to Mr. Trump.
At Commonwealth, the investment managers of its Japan Fund closely consider these developments, along with other conventional financial company metrics, in making determinations as to which companies are worthy of ownership in the portfolio. The Advisor believes accessing these Asian markets through the well-established Japanese companies is an underutilized strategy by many investors.
For more information on Commonwealth’s approach and the Commonwealth Japan Fund, visit our website.