The attractions of Japanese small caps

New small-cap index launched

The attraction of the Japanese equity market is less a macro story, but one that is more focused on developments in the corporate sector.

In the past couple of years, companies have been strengthening efforts to improve governance and deliver higher levels of profitability. These endeavours appear to be paying off: corporate profitability in Japan is at a record high. Could 2017 be the year that Japan is finally accepted back into the global investment environment? Of course, a notable recovery in business conditions since the second half of last year has helped, as has the Bank of Japan's shift to controlling the yield curve to keep short interest rates low. Higher inflation expectations help to raise the potenti...