As Japan gets back on its feet after March’s disasters, some interesting opportunities are arising that Simon Somerville is tapping into through his Jupiter Japan Income Fund.
Power shortages caused by the meltdown at the Fukushima Daiichi nuclear facility are the biggest ongoing problem. A shortfall of electricity at peak times is hampering industrial production. Industries are trying to get round the problem, with different sectors taking their weekends at different times – the motor industry now has days off on Thursday and Friday. But Somerville believes that, in the long run, the meltdown will lead to increased energy efficiency and a drop in Japan’s dependence on imported fuel. He’s playing this theme through holdings such as Yamatake, a manufacturer of building automation systems that aid efficiency.
Another knock-on effect of the power shortage is that businesses are aiming to cut their energy consumption by reducing their use of air conditioning and letting employees dress more informally. This is good for casual clothing firm Fast Retailing, another of the fund’s holdings. The government’s tactics to fund the rebuild of Japan could be “regarded as being inflationary in the long term and could also weaken the yen – both of which we believe will be extremely positive for Japanese equities”, says Somerville.
“It would be wrong to write off Japan with so many growth opportunities,” says Rob Morgan of Hargreaves Lansdown. Somerville’s fund, with a total expense ratio of 1.77%, is well placed to benefit.
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Jupiter Japan Income Fund top ten holdings
| Name of holding | % of assets |
|---|---|
| Honda Motor | 4.48% |
| NTT DoCoMo | 4.24% |
| Sumitomo Mitsui Trust Holdings | 3.90% |
| Canon | 3.89% |
| Tokio Marine Holdings | 3.51% |
| Sumitomo Mitsui Financial | 3.49% |
| Kyocera | 3.27% |
| Panasonic | 3.17% |
| Mitsubishi | 3.16% |
| Toshiba | 3.16% |