Praemium Investment Leaders

Breaking the Deflation Curse: How Corporate Governance is Renewing Japanese Equities

Praemium

June-Yon Kim, Head of Japanese Equities at Lazard Asset Management, reveals why Japan is one of the most overlooked – yet compelling – equity stories today. Discover how structural reform and the end of deflation are reshaping the investment landscape, and why the Lazard Japanese Strategic Equity Fund gives Australian investors unique access to this opportunity.

From "emerging market-like inefficiencies" in a developed economy, to semiconductor dominance and rising bank profits, Japan is rewriting its playbook – and active managers are ready to capitalise.

If you're looking for real diversification, durable earnings growth, and a market ripe for transformation, this episode is a must-listen


Praemium Limited is the issuer of the Investment Leaders and Advice Leaders podcasts. These podcasts are for information purposes only and aren't tailored to individual financial situations and do not contain financial advice. Views expressed by presenters may not align with Praemium's and nothing in this podcast should be seen as an endorsement or recommendation of the product or strategy. For more information about Praemium, including our disclosure documents, please visit our website.

We recommend that individuals seek professional financial advice before taking action.

Elisha Chea:

Hello and welcome to the Investment Leaders Podcast. I'm Elisha Cheah and today I'm delighted to be joined by our guest, Jun-Yon Kim, Head of Japanese Equities at Lazard Asset Management. June has headed up the Japanese equity team at Lazard in Tokyo for over five years and has also been a portfolio manager for Azabu Management and Fidelity International. Lazard Asset Management manages over $365 billion Australian dollars across a wide range of global, regional and country-specific strategies and recently launched the Lazard Japanese Strategic Fund in in Australia in September 24, managed by Jun and his team. Jun, you've just arrived from Japan, so welcome to Melbourne. It's great to have you here. It's great to be here with you, elijah, thank you. So, Jun, let's start with the obvious, then. Japan hasn't always really been front of mind for many investors here. Why do you think Japanese equities deserve more attention right now?

June-Yon Kim:

The biggest reason why Japan deserves more attention right now is, I think you're seeing a confluence of two big tailwinds for Japan. The first tailwind, I think, is very well known. It started with Abenomics, with his reforms and his three-arrow strategy, the third arrow being corporate governance, or actually structural reform, and a subset of that being corporate governance reform. I think that has been in play in Japan for a while, but that, converging with another tailwind of Japan finally exiting from deflation, has resulted in two powerful tailwinds which are driving the Japanese market currently.

Elisha Chea:

I've got a question later about corporate governance, but we'll come to that in a moment. Looking back at Japanese equity strategies, we've seen a number of them come to the Australian market over the years, but many of them haven't really gained as much traction as those managers had hoped for. So why do you think that is, and why perhaps is now the right time for Lazard to bring this strategy to the Australian market?

June-Yon Kim:

Yeah, I'm not sure about exactly the timing and when a lot of these managers, you know, approached the Australian market when they came in, et cetera. I would surmise that probably some of it was just sort of bad timing, bad luck. You know, there is a certain amount of luck involved with, you know, product launches or fund launches, et cetera. But I also believe that the underlying issues surrounding Japan had been quite cyclical in nature, where Japan looked like it was catching a bid. Things looked like they were turning, but then suddenly the global economy might have turned, or valuations weren't as attractive, so Japan wasn't able to see sustainable tailwinds which a lot of people were hoping for. The other thing is, I think another part of this is that has nothing to do with Japan. I think the US exceptionalism and how well the US equity market has done for 10-plus last years I think everything pales in comparison to how well the United States has looked, right looked, and how well the US has performed, more so than anything else.

Elisha Chea:

What kind of client interest has Lazard been seeing globally in Japanese equities, and does that perhaps differ between institutional and private type of clients, and how are they deploying this exposure in their portfolios?

June-Yon Kim:

Yeah, it's a terrific question. I think there are some similarities in the sense that the institutional side and the private wealth side where it is similar is where they're seeing more tactical or strategic opportunities of further increasing their weight to Japan because of these structural elements that I mentioned earlier. But in general, I would say Japan is still the second largest developed equity market in the world and people have underlying exposure and they're always looking and trying to upgrade their managers. They're on different manager cycles in terms of how performance is evaluated. So what we see from a lot of institutional demand is the fact that we've been able to deliver a strong track record over a long period of time, and people like our team-driven process and how we search and drive alpha in our portfolios overall. So I think there is the underlying institutional demand of people looking at Japan and they always have to have that constant exposure and they're always thinking about how they could upgrade that exposure. Another aspect which is somewhat similar between institutional and retail or private wealth is that a lot of folks, the things I've talked about, particularly on the governance side, is not something new. A lot of folks, the things I've talked about, particularly on the governance side is not something new. A lot of the story really started happening with Abenomics in 2013. And I think people have come to like the story over time. But how a lot of this exposure was maintained was actually through passive exposure.

June-Yon Kim:

And what's interesting about Japan is Japan, relative to other developed markets, is quite inefficient. You know, the way I like thinking about Japan is it's the second largest developed market, but with emerging market-like inefficiencies derived from the fact that Japan has suffered from Japan passing, meaning that there hasn't been a lot of strategic investment in Japanese sell side or buy side resources. But at the same time, despite Japan being the second largest developed market out there, it's very local in nature. You know, if you're going to meet a lot of Japanese companies, unless you speak Japanese, you don't have to have that meaning translated and you know that means that your one hour with the company becomes 30 minutes and you lose a lot in translation. And for these reasons, you know, I think there has been persistent inefficiency in this market which has allowed, you know, local managers like ourselves. Obviously, we're an international firm, but you know we're locally based. It gives us an advantage in the sense that a lot of these inefficiencies have remained, you know, persistent throughout time.

Elisha Chea:

Yeah, it's an interesting point around the success of active management in Japan relative to other markets, and so you're saying there's just generally less sell-side coverage of Japanese stocks relative to other markets, and so you're saying there's just generally less sell-side coverage of Japanese stocks relative to other markets as well?

June-Yon Kim:

Yes, definitely. If you look at the amount of sell-side coverage, if you look at, let's say, the biggest 1,500 names in the US and compare that to the biggest 1,500 names in Japan, to the biggest 1,500 names in Japan, you know, once you drop below, let's say, 300, it really drops off. But also, even with the mega caps right, you know the number of companies following some of these big cap companies in the United States compared to you know the number of analysts following big companies like Toyota or Sony, et cetera. You know it's a factor which is quite different overall. So I think these are things which are which are there's just been more investment in resources in the US equity market compared to the Japanese equity market in general.

Elisha Chea:

Yeah, okay, and you mentioned Japan is actually the second largest developed equity market in the world. I feel like that's yeah. Perhaps not as many investors realize that when they're just looking at an MSCI like a passive exposure to the MSCI world, is that something that sometimes surprises people that you speak to? That there's already like a sizable exposure to Japan in their passive exposures.

June-Yon Kim:

You know, what's even more surprising than that is, you know, people forget about, you know, Japan's equity bubble of the 80s, and you know, at its peak in 1989, 1990, the Japanese equity market was bigger than the US equity market.

June-Yon Kim:

In fact, right, really, even before you had the Mag7, you had back then at its peak, eight of the 10 largest companies in terms of market cap were actually Japanese and seven of those eight were actually Japanese banks. Right, so the pendulum has definitely swung, depending on how you measure it, whether it's, you know, aqui or you know MSCI All Country, or is MSCI World, whether you look at developed markets. You know, off the top of my head, I believe, if you just look at developed markets, the US is 70, right, and let's say, japan would be north of 5, but they're still number 2. If you look at AQUI, you know, I believe, the number is something more like 62% or so for the US and 38% for the rest of the world, and Japan call it is more or less five, right? So you know, typically in our industry, anything below 10 is sort of de minimis, right, you know, sort of like, but everything is de minimis compared to, let's say, the United States these days, yeah.

Elisha Chea:

Yeah, correct, and I guess, staying with that comparison with the United States, everyone's familiar with how well they've been going and particularly recently with the run that technology has been on for a few years. Now that technology sector exposure, can you, I guess, provide some information or discussion around the sector diversity and the overall diversity of the Japanese market relative to other developed markets? Yeah, Japan.

June-Yon Kim:

I think what's interesting about Japan is it's less concentrated, particularly compared to markets in Europe, where in Europe, markets are really dominated by a few big companies, and it doesn't have as long of a tail.

June-Yon Kim:

The US despite the MAG-7, actually has a relatively longer tail. There are a lot of big US companies besides the big 10, the big 7 that people always talk about, but Japan offers diversity, one in terms of the number of companies, but also there's nearly, call it, close to 4,000 listed companies in Japan. Really, in terms of, at least for what we do, what's investable for us is closer to 500 or 600 companies, but it is a very diverse market and it's not dominated by a specific area. Obviously, Japan has a very large tech sector, but the financial sector is large. The industrial sector is large. The automobile sector is quite large in Japan as well, not surprisingly given the fact that Toyota is the largest company in Japan. It's the world's largest auto company and that, single-handedly, is the biggest stock in Japan. But it represents a much smaller percentage of the market compared to the type of concentration you see with the Mag 7 in the US.

Elisha Chea:

Yeah, okay, great. So some investors might have concerns about Japan's long-term economic outlook, particularly around stagnant growth and aging demographics, which kind of gets called out in the media for a while now. How valid are those concerns today, do you think?

June-Yon Kim:

Well, I think they're perfectly valid. I mean, the fact is, you know, Japan, like all developing countries or developed countries in the world, is aging very quickly, and you know people are having less kids. Countries like Australia, which are able to still grow, is because they have open immigration policies. Japan doesn't have an open immigration policy. As a result, Japan has a lot of demographic challenges it faces.

June-Yon Kim:

However, I think it's very important to understand that talking about the economy and talking about the market opportunity are two different things. If you think about GDP growth, if GDP growth in general, I think is a good proxy for what the potential is, but it doesn't necessarily translate into earnings growth. For example, if you look at GDP growth for China over the last call it 10, 15 years, it's actually been fine, but, as you know, chinese equity markets until more recently haven't done that well. Part of that is explained I think most of it is explained by the fact that, if you look at earnings per share growth as measured by MSCI China, it's really gone nowhere for the last 10 plus years or so, while the flip side is, if you look at Japan, gdp growth has actually been very modest and actually more recently, nominal GDP growth has actually picked up in Japan, but if you look at the underlying earnings growth for Japan, whether it's over the last five, 10 or 20 years, it's actually been very robust.

Elisha Chea:

Okay, now a question that I'm very much looking forward to, and you did mention the largest company in Japan before, Toyota, but I think most people would be familiar with Japan being a heavily export-reliant economy and, of course, in today's age, with tariffs and geopolitical tensions affecting global trade, how is Japan positioned going forwards and how are you managing for these risks in the portfolio?

June-Yon Kim:

Yeah, I think actually Japan is better positioned than a lot of people think. The reason why is, as you mentioned before, elijah, japan is a very particularly big cap companies in Japan. They are very levered to global growth, right. If you look at MSCI Japan and you break down that total revenue of MSCI Japan, 55% of it comes from overseas, right? So the Japanese are very global, right, they are big players globally. However, one of the things that the Japanese have done very well is they have globalized, meaning that they have created a lot of production facilities outside of Japan. They've localized production.

June-Yon Kim:

If you go back to the 70s and 80s, when Japan was really growing very quickly, particularly the automotive sector, the majority of Japanese branded cars were exported from Japan. Obviously, japan faced a lot of that tariff pressure that China is seeing right now a lot of anti-Japanese sentiment in the 70s and 80s because of how quickly the Japanese automobile industry was growing, they localized production. If you look at the percentage of Japanese branded cars in the United States which are sold today, probably 80% are manufactured in North America, right, they've localized a lot. So if you look at that number what I told you before, well, 55% of revenues come from outside of Japan. But if you look at the number for what goes to North America it's about 19. That's pretty big. However, a lot has been localized so that's not subject to tariff. A lot is revenue which are Japanese retailers selling in the US that would not be subject to tariff. A lot are subject to exemptions which you know are Japanese retailers selling in the US that would not be subject to tariff. A lot are subject to exemptions, such as semiconductors, pharmaceuticals, whatever it may be.

June-Yon Kim:

So the net result in you know, when we looked at our underlying portfolio, we found that only about 5% of the revenues of our portfolio was directly subject to tariff risk. Right, so it was actually quite de minimis from that standpoint. However, obviously the market sold off. Our portfolio sold down with the rest of the market in April, post-liberation Day. I think it had less to do with the direct impact. It really had to do with the secondary impact, because I think what happened with Liberation Day was the fact that the expectations or the probability of a US recession went up significantly, probably prior to, let's call it, 20 or 30 percent, whatever it may pause. I think those probabilities sort of declined again overall. But I think it was more of the secondary impact, of what a slowing global economy, a slowing US economy, would mean for Japanese earnings, more so than the direct impact of tariffs.

Elisha Chea:

Okay, and perhaps using a glass half full approach, did you and the team see any opportunities post-Liberation Day that came more attractive following those market events?

June-Yon Kim:

Yes and no. Yes, there's obviously things that got sold off really aggressively, but no, given how quickly the market rebounded, it was a very, very, very short window and very small window overall. You know, we're longer term investors. When we're investing, we're investing over a market cycle of three to five years and we're really trying to understand. You know we don't try to position the portfolio tactically. We're really trying to find the companies that are going to outperform over three to five years. Obviously, within this type of volatility, obviously opportunities appear, but historically, what I found is periods like this. It makes more sense to take a pause and see this dislocation sort of normalized and see where dislocations remain, but what we really saw was a very quick correction and a very quick recovery, and so this is what I mean by the yes and no. So it was there, but it was for a very short period of time.

Elisha Chea:

Okay Now I mentioned I had a question about corporate governance in Japan and things like a lack of board diversity and lack of independent directorships. There's been commentary about that and those sorts of practices lagging in Japan. So I guess the question is, how real are those concerns today and has there been a lot of progress to improve things in that respect?

June-Yon Kim:

Yep, still very much real in the fact that governance standards in Japan lag Western Europe and the United States. However, when Prime Minister Abe launched his Abenomics, his three-arrow program, that third arrow being structural reform, specifically within that subset, you know, corporate governance reform he went to more. He went to try to institutionalize a lot of these improvements and he looked a lot to the UK terms of one, the stewardship code, the governance code, the corporate governance code. So, like the United Kingdom, japan created a stewardship code and also a corporate governance code and it's had subsequent revisions to that. So it's created a framework for governance and we've continued to see that improve over time.

June-Yon Kim:

However, in many ways Japan still lags. Probably the biggest way that they lag is Japanese companies. Before, there was no requirement to have independent directors. Now you have the requirement of if you're a prime company, at least a third of your directors need to be independent or outside. But If you look at someone like, if you're listed on the New York Stock Exchange or NASDAQ, the listing rules require you have a majority external board. Right, that still is lagging from that perspective. But Japan is moving in that direction, hopefully over time. You know, with governance, corporate governance code, you know updates, et cetera. We start moving much more toward, you know, sort of that Western standard where you have majority external boards et cetera. But you know, I think the framework has been put in place in Japan is it's great when things have been institutionalized. Japan moves in that direction and it builds up momentum and I think that's what we're seeing right now.

June-Yon Kim:

There's another aspect you know more recently, you know METI, which is, you know, the Ministry of Economy and Trade and Industry. They created framework behind fair practices for M&A, which really never existed before. And I'm sure people have read about Custard of Canada's bid for 7 and I. Something like that, you know, just 12 months ago was something unimaginable, right. But now, since there is that framework, you know Seven and I view that their board view that as a legitimate bid and that bid has to be evaluated by their external directors. And this is something I've been doing this for a very long time and if you ask anyone who's been a long-term observer of Japanese equities and you put that type of scenario into play just call it 18 or 24 months ago most people will say, oh, that's very unrealistic. But these are the type of changes that we've been seeing in the milestones that we've been seeing just in the last 12 months or so.

Elisha Chea:

Okay, and so just for the listeners that may not be aware Seven and I being the operator of 7-Eleven, of course, yeah, okay, and I suppose this kind of touches on another unique component about Japan known as the kairetsu structures. So would you be able to just explain for the listeners what that is and the history behind that and, I suppose, going forward the changes taking place away from that sort of dynamic?

June-Yon Kim:

So Japan has a unique history in terms of corporate structures and the Kei Detsu are sort of the modern post-World War II version of these loose corporate alliances Prior to World War II. You know the big Keidetsu, or Zaibatsu as they were called back then. You know Mitsubishi, mitsui, sumitomo, et cetera. You know they were big organizations which under the GHQ, which came in after World War II, sort of was trying to rebuild the Japanese economy and the Zaibatsu were blamed for part of that war machine that drove Japan into World War II. So they want to break that down, the Zaibatsu. But at the same time these corporate alliances, these affiliations, remain A lot of these companies. You talk about the word Mitsubishi or Sumitomo. You have to be very clear in which company you're talking about, because there's lots of companies named Mitsubishi or Sumitomo because they originated from the original company. Right, they would have a main bank structure, et cetera.

June-Yon Kim:

In post-World War II a lot of the Keiatsu revolve around a main bank structure and you have these different companies surrounding that.

June-Yon Kim:

This is part of the reason why Japan has probably had more inefficient use of capital more recently.

June-Yon Kim:

It was a great way for Japan to organize itself post-World War II and rebuild itself and sort of how industrial policy worked very well in Japan. But as Japan grew and where I would say Japan needed sort of more organic growth, probably these industrial structures sort of impeded some of that growth. Now what you're seeing is because people like the TSE, the Tokyo Stock Exchange, are asking Japanese companies to really think about cost of capital, thinking about capital efficiency, et cetera. If you really think about the big fundamental issues that are driving Japan in terms of why Japanese companies are somewhat capital inefficient is because they have a lot of excess cash and they also have a lot of cross holdings which are related to these corporate affiliations. And as a lot of these unwind, what you're going to see is more efficient use of capital but also more arm's length transactions overall. So as Japan moves in that direction, I think what we can see is more efficient capital usage and that should be better for corporate Japan and corporate earnings in Japan.

Elisha Chea:

With the names like Sumitomo and Mitsubishi being on a number of companies in the universe, is it something that you and the team always have to be cognizant of and kind of navigating those relationships, and has that been kind of decreasing over time?

June-Yon Kim:

Yeah, you know, as fundamental investors we're always. When you build your mosaic behind an investment thesis, when you think about managements and you think about what their incentive structures are, it's really important to understand a management's history, a company's history, and I think this is even a little bit more true for Japan, which is maybe some choices and decisions aren't necessarily made for that purely economic reason, but for other reasons, because of historical legacy or some type of corporate relationship. So these are all things that we, as analysts, try to put into our mosaic when we try to understand these companies and try to understand their motivations overall. But you know, it's just one part of what we do when we evaluate these companies.

Elisha Chea:

Yeah, okay, at the moment, are there any sectors or themes in Japan that you feel are particularly compelling and attractive?

June-Yon Kim:

Yeah, as I mentioned before when we started talking, we view really two big tailwinds when we see Japan. One is this corporate governance driving better capital efficiency, which in turn will drive higher shareholder returns of Japan, finally exiting deflation after a number of decades and returning to a normal inflationary regime. Obviously, by returning to a normal inflationary regime, that means that the Bank of Japan has to think about normalizing policy, normalizing monetary policy overall, and a function of deflation is that interest rates decline and not surprisingly, with declining interest rates you also see pressure on lending spreads as interest rates go lower and lower. The Bank of Japan is, you know, starting was it last year in March when they first ex sort of normalizing policy? Now to about 50 basis points. What we see is the potential for a lot of the Japanese banks to significantly improve their lending spreads going forward and with the improvement in lending spreads, or net interest margins, that will drive higher ROEs, which in turn should drive higher valuations for a lot of these banks as Japan continues through this normalization path overall.

Elisha Chea:

All right, okay, has there also been kind of on the demand side for, say, mortgages and loans? Is there improving components there?

June-Yon Kim:

In the last couple of years Japan is actually seeing underlying loan growth as well, and loan growth because Japan is starting to finally grow nominally again because of the return to inflation. Yeah, and you're seeing loan growth driven by a lot of, you know, capital investment happening in Japan again. You know what you've seen in the last couple of years. Is CapEx actually returning? You know, probably one of the best examples of this is, you know, TSMC expanding into Japan.

June-Yon Kim:

You know TSMC historically has always built their fabs in Taiwan. But, yeah, you know, more recently, you know their fabs, they need a footprint for global reasons and where they've looked is the United States and Arizona and Japan and Kyushu. So these are areas where you're seeing, you know, investment. You're seeing a lot of Japanese companies which haven't done. You know we talked earlier about the fact that the Japanese globalized and they localized a lot of production. As a result, in the last 20 or 30 years a lot of Japanese haven't built factories in Japan. But more recently you're seeing a lot of blue-chip Japanese companies actually come back to Japan and open up factories again in Japan. So that again is driving underlying loan growth as well.

Elisha Chea:

Okay, yeah, that's fascinating. I just didn't realize TSMC had looked at Japan to open up fabrication centers there as well. I did see something about in the US, but yeah, I wasn't aware that they were tech sector and thematic. Is there areas that Japan are leading there that perhaps maybe people don't know about as much? Or you know whether it's AI, or you know production of components and or you know rare earths and minerals and stuff like that yeah, I think, um, a lot of people.

June-Yon Kim:

You know it is true that Japan has lost a lot of this leadership in technology, particularly within consumer electronics. Because if you went back 20 or 30 years, 30 years ago, when you think of a TV, you think of Sony or Panasonic, etc. Right, yeah, these days they're much more Korean or Chinese brands, more so than anything else. So the Japanese have lost their leadership in those areas. But in many areas, particularly within advanced technology or high technology, in materials or in semiconductor capital equipment, the Japanese are still dominant and they still lead in many ways. So, if you think about the most important semiconductor capital equipment companies, where do they come from? They come from the United States, Japan and the Netherlands, right. If you think about backend, there's a front end side of semiconductor capital equipment and backend. A company called Disco, which manufactures equipment such as dicers and grinders for finishing off these wafers, has a dominant market share, effectively 90%. They've been a huge beneficiary of, you know, AI-related demand. You mentioned AI. You know most people when they think of NVIDIA. You know, when they think of AI, they think of NVIDIA. When you have an AI server, you need a different type of memory. You need high bandwidth memory and high bandwidth memory requires more disco equipment to process those wafers, et cetera. So Japan in many ways benefits from a lot of the trends that we see.

June-Yon Kim:

And I think, if you think about Japan, Japan is I'm sure people remember the Intel inside commercials. You know, a long time ago, when you know Intel sort of would, you know, demonstrate its importance of the PC, I think in many ways you could think of a lot of technology as Japan inside and a lot of the critical areas where you know, you know, I would say you know they're bottlenecks, more so than anything else. They're all Japanese companies. You know, if you look at, for example, going back to semiconductor fabrication, and you look at the starting point of making a semiconductor requires a mass blank right which is effectively the big piece of quartz where you will, you know, put the imprint of the circuit design et cetera. Well, there's three manufacturers in the world and they're all Japanese Hoya, agc and Shinetsu.

June-Yon Kim:

If you look at the photo resist market chemicals which are needed for the manufacturer of semiconductors, 90% plus are Japanese manufacturers, right? So I think a lot of people forget that there was a great article which came out. When you know the virtual reality or the augmented reality headset that Apple developed a couple of years ago? Yeah, and I saw an article about that and about 40% of the bill of materials were actually Japanese companies. 40%, yeah, 4-0. Yeah.

Elisha Chea:

Okay, yeah, that's fascinating. Perhaps the last question to finish off if you could leave investors with one thought about why Japan might surprise them over the next few years or so, what would that be?

June-Yon Kim:

I think if you fast forward five to 10 years from now, I think what investors might be most surprised by is Japanese earnings growth. Right End of the day, if you think about why we're so optimistic about the market over a longer period of time, is because we see a roadmap of faster earnings growth for Japan, driven by those two tailwinds that I mentioned. The reason why is earnings growth has been fine in Japan In many ways. You know Japan. If you believe the world is going to grow, japan will grow, right. You know, since the 80s the world has grown I forget what the number is, call it four or five, whatever it is you know per year. And because Japanese companies are so global, they benefit from that underlying growth.

June-Yon Kim:

But at the same time, if you go back to what I said about the fact that as Japan goes away from deflation goes into inflation, what that means is that the economy itself will change. Meaning that consumption behavior, investment behavior, risk attitudes, all those aspects of the economy will change. Meaning that consumption behavior, investment behavior, risk attitudes, all those aspects of the economy will change, and we're already starting to see a lot of those changes. But more importantly, what that means is for companies themselves. That means that Japanese companies will no longer be price takers but price setters.

June-Yon Kim:

So that means that if you think about Japan, what Japan offers is this runway of growth and the ability to actually potentially expand margins, driven by the fact that they now have this price setting capability, plus driven by the fact that Japanese companies are overcapitalized right, they're overcapitalized because of that inefficient use of capital. That means that the share count to support these underlying businesses is going to decline. So you put those two together. What does that translate? That translates into stronger earnings per share growth and, I think, in general, fast forward five to 10 years from now. What people might be most surprised by is the fact that Japan Inc, or the largest Japanese companies, actually deliver pretty strong earnings growth.

Elisha Chea:

Okay, jun, thank you so much for coming by. Japan Inc, or the largest Japanese companies, actually deliver pretty strong earnings growth. Okay, june, thank you so much for coming by. It's been a fantastic conversation about Japan and touched on a lot of different sectors there. So, yeah, thank you again for coming on to the podcast.

June-Yon Kim:

No, it's my pleasure, thank you.

Speaker 3:

Premium Limited is the issuer of the Investment Leaders and Advice Leaders podcasts. Thank you.

People on this episode