Are we still in early recovery? Japan's road to recovery on Olympic year still a marathon, not a sprint

Deep Dive into Japanese equities

Most asset allocators have a story of being epically wrong on Japan at least once in their careers. In my case it was missing the 40% Topix rally of 2005 only to buy and then see them underperform global equities by 20% in 2006.

This taught me two lessons. The first is that solid global growth is not enough. Investors tend to prize Japan most highly when growth is accelerating, even from weak levels.   Historically, Japanese companies have seen earnings that are both volatile and synchronised with global economic growth.   The reason is that compared to other regions, Japan's listed sector has higher weightings to industrials and manufacturing. These firms tend to have large fixed cost bases (capital equipment) relative to their labour costs. If anything, recent advances in industrial robotics and automati...