After years of being shunned, Japanese stocks are getting attention from U.S. investors.
The reasons for avoiding the Tokyo stock market, which date to the late 1980s, are no longer applicable, say financial professionals, pointing to an increased focus on profits by Japanese companies and the fact that Japan is well-positioned to benefit from a global economic recovery.
“To compare now with the 1980s really is like apples and oranges,” says John Vail, Tokyo-based chief global strategist at Nikko Asset Management.
In the late 1980s, a speculative bubble pushed up stocks and real-estate prices in Japan. Meanwhile, Japanese corporate culture wouldn’t allow broken companies to fail, and shareholders were given short shrift from management in terms of things like buybacks and dividends, says Mr. Vail.
For most of the time since then, Japan’s stock market has been weak at best. Only in November 2020 did the Nikkei Stock Average, which tracks Japan’s largest traded stocks, surpass the 26489 level, a height it hadn’t reached since March 1991. In comparison, the S&P 500 index was at 390 in March 1991 versus 4019 now.
