Nonsensically cheap: A great deal of unlocked value still to be found in Japan

Deep Dive into Japanese equities

We are always looking to invest in assets with a margin of safety, so therefore prefer assets that are cheap in absolute, as well as relative, terms. This can be a problem if most investable assets are expensive – as they are today.

Fortunately, the Japanese equity market stands out as being indubitably cheap. When comparing equity markets across regions, it is crucial to adjust for both sector weightings and cyclicality of earnings. Once this is done, Japan stands out as being a market that is not only cheap compared to some very expensive markets but also compared to its own history. This is an excellent starting point for an investment case. Many deride the Japanese market as being home to companies that place shareholder interests low down the list of priorities and that it deserves a discount to other market...