Japan: Time to refocus on earnings

Unusually compelling valuations

Ernst Glanzmann and Reiko Mito, Japanese equity managers at GAM, on why the upcoming reporting season in Japan will refocus investors' attention on earnings.

Japanese equities have enjoyed an encouraging first-half of the year, gaining support from more consistent levels of economic growth. GDP came in at 1.0% in 2016, while consensus forecasts for 2017 and 2018 are 1.5% and 1.0% respectively. In the current year, growth is likely to be largely attributable to exports, with capital expenditure (capex) and consumption expected to assume the role of key GDP drivers in 2018. Capex is currently running at around the 5% level, which is approximately double that of the five-year average. An additional factor that can often be exaggerated in term...