Japan in Focus

In 2023, the Tokyo Stock Exchange asked companies listed on its Prime and Standard Markets to examine their cost of capital and share prices, disclose their plans and continue engaging with investors. It publishes a regularly updated list of companies that have disclosed information in response.

For investors, the question is whether those plans lead to lasting changes. A buyback may improve per share figures, but the broader test is whether a company can deploy its cash and assets more productively, improve returns and sustain distributions without weakening its balance sheet.

Japan’s sogo shosha, or general trading companies, operate across resources, energy, food, machinery and other businesses. Their activities extend beyond trading goods: they may invest in production assets, arrange supply contracts and participate in logistics or distribution.

That reach makes them a way to examine several Japan themes at once, from access to resources to capital allocation. It also makes them harder to assess. Investors need to distinguish recurring earnings from gains on asset sales, and consider how much profit depends on commodity prices.

The AI buildout depends on physical equipment as well as chip design. Japanese companies participate in semiconductor testing, manufacturing equipment, materials and factory automation.

Demand can rise when chip production grows or testing becomes more complex. These businesses remain exposed to customers’ investment cycles, however. A strong order period does not guarantee that spending will continue at the same pace.

Japan’s listed market includes familiar consumer and industrial companies alongside less visible suppliers whose products are deeply embedded in customers’ production processes.

Specialist expertise may help a company maintain pricing power. Investors still need to examine customer concentration, overseas demand and the risk that another technology could replace its products. A strong industry position and an attractive share price are separate questions.

A Singapore investor in a yen denominated security faces both an investment return and a currency return. If the security rises while the yen falls against the Singapore dollar, the currency move can reduce or even erase the gain when converted back to SGD. Yen strength can have the opposite effect.

Currency can affect the company too. A weaker yen may help some businesses translate overseas earnings into yen, while raising costs for importers. It helps to assess the business, its valuation and the currency exposure individually.