Thais Urged to Move Into Japanese Stocks

Why It Matters

The shift signals a potentially higher‑return, lower‑valuation opportunity for regional investors as Japan moves from deflation to growth, reshaping asset allocation across Asia.

Key Takeaways

• Japan's corporate reforms boost shareholder returns and buybacks
• Deflation ends, giving firms pricing power and earnings growth
• Japanese stocks trade at cheaper valuations than US peers
• Sanaenomics targets AI, semiconductors, automation for future growth
• Principal JEQ fund posted 29.8% one‑year return

Pulse Analysis

Japan’s equity market is entering a transformative phase driven by sweeping corporate reforms and the official end of a deflationary era. Governance upgrades have forced companies to prioritize shareholder returns, leading to record share buybacks and stronger profitability metrics. At the same time, firms are regaining pricing power, translating into robust earnings‑per‑share growth that now eclipses expectations for U.S. equities. For investors, these dynamics create a rare convergence of rising earnings and still‑attractive price multiples, a combination seldom seen in developed markets.

The government’s “Sanaenomics” agenda further amplifies the upside by channeling public‑private investment into 17 high‑growth sectors such as semiconductors, artificial intelligence and automation. Coupled with the Nippon Individual Savings Account (NISA) scheme, which incentivizes households to shift cash into equities, the policy framework is expanding the domestic investor base and deepening market liquidity. This strategic focus on future‑oriented industries aligns Japan with global technology trends, offering Thai and other regional investors exposure to sectors poised for long‑term expansion.

Against this backdrop, Principal Asset Management’s Japanese Equity Fund (PRINCIPAL JEQ) leverages a value‑oriented, bottom‑up approach, selecting high‑quality stocks across healthcare, pharmaceuticals and industrial manufacturing while also targeting under‑researched small‑ and mid‑caps. The fund’s recent performance—29.8% annualised return over the past year, 25.1% over three years, and 16.5% over five—demonstrates the tangible benefits of combining disciplined valuation screens with exposure to Japan’s emerging growth catalysts. For Thai investors seeking diversification, the fund offers a compelling blend of stable cash‑flow generators and upside from the country’s structural renaissance.