Is Japan springing into bloom?

Japan’s business and government leaders have undertaken efforts to revitalize the country’s economy. Dina Ting, Franklin Templeton ETFs’ Head of Global Index Portfolio Management, discusses some of these positive developments.

During a recent trip to Japan, I felt fortunate to be able to catch the country’s cherished “hanami,” or “flower viewing” season. The delicate and beautiful blossoms were on full display then, although only briefly before rain showers left them looking like snowfall on Tokyo streets. Nonetheless, it was great to be back and traveling through post-COVID Asia, which is bustling with the return of both leisure and business visitors.

Tourism to Japan has been surging, with entries rising exponentially since the country reopened last fall. In March, Japan notched 1.8 million foreign visitors, and it is now on track to receive 20 million visitors this year.1 Besides the welcome rebound in arrivals, renowned investor Warren Buffet’s recently renewed attention to several Japanese trading giants has meant more positive developments for Japan.

The value-investing guru’s Japan stock picks are basically conglomerates with reach into many sectors represented in the country’s broad market. In particular, these represent the top sector of the FTSE Japan Capped Index, industrials (22.6%), as well as the index’s fourth largest sector, financials (10.5%).2 Years to date, the index is up nearly 7%, led by industrials.3 The positive potential diversification story has naturally piqued investor interest. In our analysis, there are more reasons to consider a Japan allocation in the long run.