Banks and trading companies offer some of the best income opportunities in Japan at the moment, in contrast to their counterparts in the Western world, according to Richard Aston, manager of the Coupland Cardiff Japan Income & Growth investment trust.
"Trading companies, along with banks have been at the forefront of a revolution of shareholder return," he said.
"In the financials sector, we have seen dramatic dividend cuts from Western banks, but this hasn't been the case in Japan. Leading banks have all maintained their dividends and we have even seen growth."
At the same time, Japanese financials such as banks and trading companies have been the beneficiaries of the reversal of fortunes for the value investing style, and have performed strongly in 2020 as a result.
The trust has increased its allocation to these sectors, which Aston considers to be important growth engines going forward.
He added that "there is a risk when investing in pure value in Japan, as a lot of these companies are not going anywhere".
For example, he points to Mitsubishi Heavy Industries, which saw its dividend halved last year, while its share price, having risen to a high point in March, was still well below previous highs and has been declining ever since, a trend he expects to continue.
Meanwhile, sectors such as steel and shipping, which fall into the value category, are not managed with the long-term interests of their shareholders in mind, according to the manager.
As such, they are quick to slash dividends to zero when the going gets tough and tend to be "very fragmented", especially in the case of the shipping industry.
Despite the global shift from growth to value, these areas are therefore to be avoided.
Commenting on performance during 2020, Aston said it was a tough year for the portfolio, partially because of the trust's exposure to companies in the consumer staples sector, which were hit hard by the pandemic.
But while this led to a review of portfolio holdings and some stocks being sold, the manager still believes the tourism sector in Japan will prosper after the pandemic is over.
"We haven't given up on tourism in Japan," he said. "At the moment, borders are closed to visitors. But in the long run, we think it will promote tourism as one of its pillars of growth."
According to FE fundinfo, the £207m trust has underperformed its IT Japan sector over five, three and one-year periods to 28 April both in terms of NAV and share price.
Over five years, its share price return is 55.7% and NAV is up 72.6%, against a sector average of 104.4%.