The Japanese economy stands out amongst other advanced economies. There are appealing investment opportunities in the country due to under-valued businesses in the market, many of which are still cheap relative to their potential to make profits and the market looks set to continue to deliver better value versus other developed economies – the good performance of Japanese equites year to date reflects this trend.

Over the long term, after allowing for inflation, the Yen appears to be cheap (see chart below which shows the gradual weakening of the Yen vs Dollar, particularly over the last 2 years). Moreover, historically, the Yen has performed well during economic downturns, which shows resilience in challenging market environments.  Japan is currently experiencing an upturn in economic growth after many years of deflation, but it doesn't face the same inflation issues that the UK does.


Past performance is not a reliable indicator of future returns. Performance quoted below is gross and does not take into account the costs of investing, such as transaction and custody fees. The source of all data is MSCI.


Japan has been making changes in how businesses are run, like allowing companies to buy back their own shares, increasing dividends, and encouraging shareholders to take a more active role. Such actions have been permitted across many developed economies and these reforms have been in motion for many years in Japan, but the positive results are only now beginning to surface. In other words, the changes in how companies are managed in Japan are finally paying off, and it's contributing to the increasingly attractive nature of Japanese markets at present.

The noise

  • Persistent selling of US government bonds has driven treasury yields to their highest point in over 15 years, causing turbulence in various markets, including stocks and real estate. On Thursday, the 10-year Treasury yield, which has an inverse relationship with prices, briefly hit the 5% mark. Among the factors driving the move were expectations that the Federal Reserve will keep interest rates elevated and mounting US fiscal concerns. The bedrock of the global financial system, soaring yields in the US Treasury market has wide-ranging effects.

  • China posted GDP growth of 4.9% in the third quarter of 2023 from a year earlier, beating expectations of 4.6% growth, as retail sales and industrial production in September were more robust than anticipated. Weakening growth in China led authorities to step up their support efforts, with latest data released this week suggesting these measures are beginning to show positive results. However, a property crisis and other headwinds continue to pose risks to the outlook.

  • The European Investment Bank (EIB), the lending arm of the EU is lining up “debt-for-climate” swaps where countries from Africa and the Caribbean would see their debt cut in return for combating or adapting to global warming. Barbados will likely be the first country to enter this sort of agreement, with the EIB hoping to sign similar agreements with up to 10 other countries. These deals allow a country’s existing debt to be bought up and replaced with cheaper bonds thanks to credit guarantees provided by multilateral development banks.

The numbers

GBP Performance to 19/10/2023

Equity GBP Total Return

1 Week








MSCI Europe






MSCI Japan



MSCI Asia Pacific ex Japan



MSCI Emerging Markets






Fixed income GBP Total Return


UK Government



Global Aggregate GBP Hedged



Global Treasury GBP Hedged



Global IG GBP Hedged



Global High Yield GBP hedged



Currency moves












Commodities GBP return








Source: Bloomberg, data as at 19/10/2023


The nuance

UK CPI, the benchmark measure for inflation held steady at 6.7% in September, with a rise in petrol prices between August and September spurred principally by Saudi and Russian supply cuts. It remains the highest inflation rate of any advanced economy, and the latest reading will likely make it difficult to rule out any further hikes in interest rates. Bank of England policymakers will be further worried by core inflation (excludes food and energy) and services prices, as the two less volatile measures were also strong.

Off the back of Wednesday’s data release, sterling rose relative to other major currencies. British government bond prices fell further as markets signalled their expectation that the Bank of England is more likely than not to increase rates, though not at their next meeting in November. Elsewhere, UK pay excluding bonus data for August showed wages were rising faster than inflation, though weaker wage growth is expected in the coming months.

All investment views are presented for information only and are not a personal recommendation to buy or sell. Past performance is not a reliable indicator of future returns, investing involves risk and the value of investments, and the income from them, may fall as well as rise and are not guaranteed. Investors may not get back the original amount invested. Any views expressed are based on information received from a variety of sources which we believe to be reliable, but are not guaranteed as to accuracy or completeness by atomos. Any expressions of opinion are subject to change without notice.

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