This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bullish on Japan


NEW YORK ( TheStreet ) -- After years of stagnating, Japanese stocks have soared lately.

During the past year, Japan mutual funds have returned 37.4%, according to Morningstar. The gains were triggered by the mammoth stimulus programs championed by Prime Minister Shinzo Abe, who took office last December.

Can the rally continue? Yes, say some mutual fund managers. "The government's strategy is working," says Taizo Ishida, portfolio manager of Matthews Japan Fund (MJFOX).

Abe has undertaken a broad-based effort to revive the economy. At his urging, the Bank of Japan began a massive program of bond buying. That has helped to keep a lid on interest rates and depress the value of the yen. The cheaper currency makes Japanese goods cheaper for foreign buyers, boosting exporters of autos and machinery.

In addition, the government is spending heavily on domestic infrastructure, a program that has helped construction companies. With the stimulus efforts boosting sales, the economy grew at an annual rate of 1.9% in the quarter ended in September. Corporate earnings for the period are expected to grow more than 50% from the year before.

So far, growth has been held back by stagnant wages, says Taizo Ishida of Matthews Japan. But there are signs that pay is poised to climb. With profits growing, corporate managements began to raise bonuses last summer. Now there is more talk about fattening base salaries, Ishida says. "Some companies are saying that they will raise wages next year."

To hold a stake in Japan, consider Columbia Pacific/Asia (CASAX). During the past five years, the fund returned 15.8% annually, outpeforming 83% of peers in the Pacific/Asia category. The Columbia fund now has 40% of its assets in Japan, up from 33% a year ago. "We increased our weighting in Japan when it became clear that there was a dramatic change in government leadership," says portfolio manager Daisuke Nomoto.

He says that Japanese stocks remain attractively valued. The Tokyo market sells for 1.3 times its book value, compared with 2.7 for the S&P 500. Nomoto says that Japanese companies can continue to increase earnings because managements cut costs to the bone during the long period of stagnation. With break-even levels reduced, small revenue improvements will translate into big profit gains.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs