The New Japan Trade

Summary

Panelists from Morgan Stanley and MUFG discuss Japan's structural bull market driven by macro shifts, corporate profit improvements, and capital reform. They highlight three structural changes supporting Japanese equities. The government's growth strategy under PM Takaichi focuses on strategic investment in AI, robotics, semiconductors, and defense.

• Panelists are bullish on Japanese equities citing three structural changes: macro environment, corporate profits, capital efficiency.
• Macro shift to stable inflation and wage growth is unprecedented in Japan.
• Corporate profit improvements driven by price pass-through rather than cost-cutting.
• Increased capital efficiency awareness leading to share buybacks and dividends.
• Takaichi administration's growth strategy emphasizes strategic investment in AI, robotics, semiconductors, and defense.
• Banks are lending actively and not buying JGBs; younger investors shifting to equities under NISA.
• Life insurers are net sellers of long JGBs due to regulation and mark-to-market losses.
• Risks to bullish view include fiscal concerns and BOJ normalization.