According to Shiozumi, manager of the Legg Mason IF Japan Equity Fund, Japan’s stock market revival is less than halfway through its lifespan, with the bull market entering the second stage of four in May.
Abenomics will continue to support equity markets over the next three to four years, with the series of bold policy reforms stimulating company valuations, noted Shiozumi.
"Companies are now increasing dividends or buying back shares, and Japan’s return on equity is expected to go from 9% to 12%, while tighter corporate governance measures are expected to underpin these positive developments," he said.
Considering Abenomics to be the key behind Japan's economic revival, Shiozumi expects the market to climb further from here, following Prime Minister Shinzo Abe decision to launch three new arrows: further economic stimulus measures, enhanced child support and an increase in social security.
The new measures aim to increase Japan's economy by 20% by addressing the country's aging society, and Shiozumi believes they will have a positive effect on the Japanese stock market. “Changes of this scale throw up investment opportunities, and we are well placed to benefit from them” he added.
The lack of exposure to equities among domestic investors in Japan (Japanese investors currently only have 5% in equities) is also poised to add additional support to equities, in Shiozumi's view.
“We think they will play a much greater role in the future, and we are already seeing a ‘great rotation’ away from bank deposits into riskier assets such as equities and property,” he said.
Focusing on the "new Japan" - companies that benefit from the Japan's shift from a regulated to unregulated economy, and from a manufacturing to a service-oriented model - The Legg Mason IF Japan Equity Fund returned 90.3%, versus the Japan sector average return of 11.7% over the past three years.