Please ensure Javascript is enabled for purposes of website accessibility

Trip note - Japan

  • Tweet
  • Share on LinkedIn
  • Share via email
  • Print
  • Download

November 2022

At the beginning of September, Walter Scott investment managers Alistair Ceurvorst and Fraser Fox went on a two-week research trip to Japan. Here, Alistair Ceurvorst shares insights from the meeting where they met with 32 companies in three cities – Tokyo, Osaka and Kyoto.

Tokyo feels less busy than the last time I was here in December 2015, which is likely the result of changes in people’s working habits. I was surprised by the number of companies that mentioned rethinking their floor space requirements and adopting flexible work options to retain employees and adapt to a post-Covid world. Home apartments tend to be small, so I always assumed working from home in Asia wouldn’t be popular. This new set up poses obvious questions for some companies that own real estate in and around Tokyo and the rest of the country.

Japan’s ageing demographic is also forcing companies to evolve. When you look around it’s quite noticeable the average age is higher than in the US, even on the weekends when children aren’t in school. Not only is Japan grappling with how to look after and pay for a growing number of elderly people, but the workforce is shrinking, which in turn is increasing the competition for talent.

Inflation has reared its ugly head in Japan as it has around much of the globe. The country has been desperately trying to manage inflation for decades. Unfortunately for the Bank of Japan, now that they finally have some inflation, everyone is complaining about it. The weak yen has significantly increased the cost of imported goods. This has come on top of a sharp rise in energy and raw material costs, creating a very painful cost-of-living squeeze for the Japanese.

Despite these challenges, the Japanese are finding ways to drive efficiencies and improve productivity. That is, they are good at figuring out how to do more with less. For example, factory automation and aiding customers via digital tools and processes. We experienced this first hand while dining at a café where we chatted with, and were served by, a robot. What’s more, we learned that the robot was operated by a young disabled woman 1,000 miles away. This is a prime example of technology allowing someone to work who may not have been able to otherwise. There is still an important role for talented human beings, but clearly machines are helping to fill some voids.

Overall, the quality of company meetings was exceptional. We heard companies talk about returns, returns on equity, returns on cash to shareholders and environmental, social and governance (ESG). A very productive and insightful trip.

All investments involve risk, including the possible loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

The holdings listed should not be considered recommendations to buy or sell a security.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change.

The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

There is no guarantee that any strategy that considers environmental, social, and governance (ESG) factors will be successful, or that any strategy will reflect the beliefs or values of any particular investor. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities as investors that do not use such criteria.

BNY Mellon Investment Management is one of the world’s leading investment management organizations, encompassing BNY Mellon’s affiliated investment management firms, and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.

Walter Scott & Partners Limited (“Walter Scott”) is an investment management firm authorized and regulated in the United Kingdom by the Financial Conduct Authority in the conduct of investment business. Walter Scott is a subsidiary of The Bank of New York Mellon Corporation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Securities Corporation is a subsidiary of BNY Mellon.

Not FDIC-Insured | No Bank Guarantee | May Lose Value

© 2022 BNY Mellon Securities Corporation, distributor, 240 Greenwich Street, 9th Floor, New York, NY 10286.