A strong rally in Japanese stocks has helped Japan equity funds listed on financial planning platforms outperform their Australian counterparts.
Japan’s Nikkei 225 index, a gauge of the country’s industrial companies, including Canon and Toyota, jumped 6.5 per cent to 13,481 points in the second quarter.
Japan’s broader Topix index rallied 7.5 per cent to 1320 points in the same period.
This compared to the S&P/ASX 200, which declined nearly 3 per cent to 5215 points, while the MSCI World Index dropped 4.5 per cent to 1402 points.
Japan’s rally helped large equity funds, such as the Platinum Japan Fund, BT’s Japanese Share Fund and Perennial’s Japanese Equities Trust, outperform peers in the second quarter as stocks elsewhere faltered.
The share rally in the world’s second-biggest economy was buoyed partly by inflation, the nemesis of many central bankers, Platinum Asset Management portfolio manager Jacob Mitchell said.
There was a belief inflation was good for Japan as it forced domestic investors, who were ungeared and conservative, out of bonds and into equities, Mitchell said.
“We think Japan is ripe for outperformance [over the next two years], though absolute returns from equities will be tough until the United States house price declines moderate,” he said.
Mitchell helped manage Platinum’s Japan Fund, which held $545 million, according to Morningstar data.
He said he favoured Japanese bank, construction and property development stocks.
CSLA strategist Russell Napier agreed with Mitchell’s view and added inflation would cause Japanese consumers to spend more, which would improve profits for manufacturers.
Kyoto-based video game manufacturer Nintendo soared nearly threefold last year as consumer demand for its Nintendo Wii gaming platform soared.
The stock helped RCM’s Global Equity High Alpha deliver an 8.40 per cent return last year, when it held the stock.
Data from the Bank of Japan showed the country’s consumer price index rose 1.5 per cent in May from the same month last year, the biggest rise in a decade.
