Not only have Japanese companies’ earnings started to pick up, the currency story is now also radically different with the yen having gained 5.8% versus the euro since the start of the year. Moreover, Japanese equities have been the strongest performing asset class year-to-date, having returned 24% in euro terms so far.
At first sight this radical change in dynamics has not really affected investor sentiment in Europe. On a Pan-European basis, still about half of fund buyers will keep their exposure to the land of the rising sun unchanged during the next 12 months, and only about one in five plan to change exposure.
Enamoured or indifferent
But a closer look at the freshest country-specific data reveals a radically different picture. In some countries, there is a sense of Japan fever, while others still couldn’t care less about the asset class. At the end of last year, only one country harboured a significant community of Japanese equity fans: Portugal, where over a third of fund buyers said they would increase exposure in the next year. Now, five countries have more than 30% buyers, with Italy being the most enthusiastic country: close to half of fund buyers there plan to increase their allocation to Japanese equities, while just 6% are scheduling a retreat.
By contrast, the Nordic countries (except Sweden, which often stands out from its Nordic peers when it comes to investment preferences), the Netherlands and Spain prefer the status quo. A convincing majority in all these countries keep their allocation stable, while both buyers and sellers are few and far between.