Hawksmoor says Japan has historically been happy to accept deflation, but the present government is trying to combat it and promote growth. Evidence for this can be seen from the Japanese central bank’s recent intervention to weaken its currency by selling yen and buying dollars.
Hawksmoor feels this action was justified because the market cannot turn around while the yen is strong. The firm recently adjusted exposure to Japan in its Vanbrugh fund by switching into the sterling hedged version of its preferred Japanese fund, Jupiter Japan income.
The Hawksmoor team thinks the Bank of Japan might be given a different mandate of targeting growth, but market valuations remain depressed which suggests that no good news is being priced into asset valuations. Investors could benefit from this situation if Japanese firms do better than expected.
Fund manager Daniel Lockyer says: “The Japanese government is putting lots of measures in place to defeat deflation but the stockmarket is not expecting it to work and is already discounting the consensus view in prices.”