To The Moon

The Japanese Stock Market: A Sleeping Giant

The Japanese stock market has been on a journey in recent years, with the Nikkei 225 index more than doubling in value since 2012. There are a number of reasons for this strong performance, including:

• Abenomics: The economic reforms implemented by Japanese Prime Minister Shinzo Abe have helped boost the Japanese economy and corporate earnings.

• A weak yen: This made Japanese stocks more attractive to foreign investors.

• Strong corporate earnings: Japanese companies have been reporting strong earnings growth in recent quarters.

• As a result of these factors, Japanese stocks are now trading at some of their highest levels in years. However, there are still a number of attractive investment opportunities in the Japanese market.

When choosing Japanese stocks, it’s important to focus on companies that are well-positioned to benefit from the ongoing economic recovery in Japan. Some of the best-performing and most attractive stocks according to Warren Buffett in recent years include:

• Toyota Motor Corporation: is the world's largest automaker and a major beneficiary of the strong global demand for cars.

• Sony Corporation: is a global leader in consumer electronics and entertainment.

• Nippon Steel & Sumitomo Metal Corporation: is the world's second-largest steelmaker benefiting from the strong demand in steel from China.

• Mitsubishi UFJ Financial Group, Inc.: is the largest bank in Japan which benefits from the recovery in the Japanese economy.

Investing in the markets comes with an element of risk and those risks associated with Japanese stocks, include:

• Political risk: Japan is a stable democracy, but there is always the risk of political instability.

• Economic risk: The Japanese economy is still recovering from the 2008 financial crisis and there is always the risk of a recession.

• Currency risk: The Japanese yen is a volatile currency and its value can fluctuate significantly.

Conclusion

Despite the risks, Japanese stocks offer a number of attractive investment opportunities. Investors looking for exposure to the Japanese market should focus on companies that are well-positioned to benefit from the ongoing economic recovery.

Warren Buffett an astute investor with a long history of investing in Japanese stocks. In more recent years, Buffett increased his stake in Japanese companies, such as Toyota Motor Corporation and SoftBank Group Corp.

In my opinion it is well worth considering Japanese stocks forming part of your portfolio, taking a lead from Buffett's himself. In my opinion the Japanese stock market is undervalued and there are a number of attractive investment opportunities available.

My aim would be to achieve a total return of 10% per year over the next five years. As I believe this is a reasonable target, given the current valuation of the Japanese stock market and the potential for economic growth in Japan.

There are a number of reasons why Japanese stocks are performing so well in recent years. These include:

• A weak yen: makes Japanese stocks more attractive to foreign investors.

• The economic recovery: The Japanese economy has been recovering from the 2008 financial crisis and is now growing at a healthy pace.

• Corporate earnings: Japanese companies have reported strong earnings growth in recent quarters.