Outlook for 2022

Transcript of the recording:

As for the outlook for this year and onwards, changes in Japan’s economic and social structure will accelerate following the COVID pandemic, as the digital transformation of social infrastructure continues to make progress.

In addition to accelerating digital transformation to improve productivity, Kishida’s pillar policy is to create a virtuous cycle of economic growth and wealth distribution to stimulate consumption for the economy as a whole.  Kishida emphasises that the economy should become domestic, consumer demand led recovery as soon as possible.  When the economy returns to more normal, consumer spending should increase strongly, as in the US, which in turn will benefit the retailers (online and offline) as well as welfare outsourcing and various other companies in the service sector that we hold. 

Digital transformation of social infrastructure is essential for the Japanese economy to become revitalized.  Digitalisation has led to the emergence and development of new business and new services, thus creating more investment opportunities for us.  While the current competition is high in new growth areas in which we have started to invest, such as digital consulting and digital medical services, we believe these industries should become consolidated in the near future, and market leaders in these industries will start to enjoy accelerated sales and profit growth.  We don’t know when and what will change market characteristics, but we remain patient with companies we have high conviction.

Over the past one year, the Japanese equity market has been led by economic sensitive value stocks.  With improvement in labour productivity and higher wages, the Japanese economy will gradually become more consumption and service-oriented, as many people had hoped for many, many years.  Any sign of a pick up in consumer spending will change market sentiment toward growth stocks, which we expect will be some time during the second half of this year.  The past performances have been achieved with our consistent investment philosophy and we have no intention to change this in the foreseeable future.  Rather, our investment philosophy will, we believe, bear even bigger fruits in the years to come, as the Japanese economy become revitalised.