Tokyo-based Richard Kaye, portfolio manager of Comgest’s Japan Equity Strategy, discusses the outlook and investment opportunities in the region.

With the OECD predicting that Japan will have the highest growth economy in the G7 in 2023, Richard Kaye at Comgest, a Paris-based growth investor, is optimistic about opportunities for investors. 

According to the OECD, Japan’s real GDP growth is expected to reach 1.8 per cent in 2023, followed by Canada with a growth rate of 1 per cent and France at 0.6 per cent. At the other end of the scale is the UK, with a negative growth rate of 0.4 per cent forecast.  

Meanwhile, Japan’s new economic policy package is expected to support domestic demand, partly offsetting subdued household confidence and real income loss, the OECD added. 

Comgest’s investment philosophy is based on investing in a few high-quality long-term growth firms. Factoring in ESG criteria into the investment process is also important for the growth investor and it is something that is gaining increasing attention from investors. Most of the firm’s funds come under Article 8 of the EU’s Sustainable Finance Disclosure Regulation.  

Speaking at a media briefing in London recently, Kaye outlined investment opportunities in Japan, highlighting how the country will benefit from the reopening of China’s economy, after its zero-Covid policy, as well as from the growing middle-class in Asia. 

“Japan has also just reopened its borders, targeting 60 million tourists in 2030 compared to 24 million in 2019,” he said. “In addition, Japan is equipping Asia’s industry in automation, semiconductors and medical technology,” he added.

“Fast retailers, such as Japan’s Uniqlo, are also capturing Asian fashion lovers, proving particularly popular in China,” he continued.     

In tech, he sees opportunities in Hoya, a global specialist in eyeglasses, and Sysmex, a pioneer in Alzeimer diagnosis, liquid biopsy and robot surgery. He also highlighted how Japanese banks have outperformed their US peers by 30 per cent since January 2022.

Japan equity strategy
Japanese equities started the year strongly, in spite of ongoing volatility. Comgest’s fund has 44 holdings, with key sectors focused on consumer discretionary, industrials, IT, healthcare and consumer staples.  

The top five holdings include FANUC, a Japanese group of companies that provide automation products and services such as robotics, as well as the Sony Group. They also include Daikin, a provider of air conditioning solutions and Suzuki Motors. Shin-Etsu Chemical, Japan’s largest chemical firm with the largest global market share for semiconductor silicon, is also in the top five.