Managing an international investment fund is about identifying structural shifts before they are fully accepted by the broader market. Over the past few years, our highest conviction thesis has been the corporate renaissance unfolding in Japan. Currently, we hold a 36% allocation to Japanese equities, and it has been the primary engine driving our fund's returns.
The story in Japan is no longer just about cheap valuations; it is about fundamentally improved profitability, rigorous asset efficiency, and an unprecedented commitment to shareholder returns.
A Market Defying Global Expectations
The performance metrics emerging from Tokyo over the last few years demand attention. Japan is quietly delivering a multi-year compounding story that rivals, and in many cases exceeds, the most celebrated global indices. The return is in SEK and includes dividends.
| Time period | Nikkei 225 (Japan) | Nasdaq 100 |
| 1 year | +55,0 % | +24,0 % |
| 5 year | +139,0 % | +89,0 % |
The Catalyst: From the TSE to the FSA
This outperformance is the direct result of a regulatory mandate that has forced Japanese corporate culture to evolve.
The initial step occurred when, in March 2023, the Tokyo Stock Exchange requested that its listed companies develop and disclose business management plans being conscious of their cost of capital and stock price. The market's response has been comprehensive. As of May 2026, 94 percent of companies listed on the TSE's Prime Market have disclosed their plans to improve key indicators such as the price-to-book ratio. Furthermore, data indicates that companies actively recognized in the "good practices group" for their disclosures are visibly outperforming those that have not yet disclosed
Whats next?
Now, the Japanese Financial Services Agency (FSA) is accelerating this momentum. Under newly discussed frameworks, companies are being asked to justify the excess cash sitting idle on their balance sheets. Additionally, the government is exploring tax breaks for corporations that sell off non-core assets and unwind legacy cross-shareholdings.
For us as investors, the benefit is clear and direct. Imagine a business that has hoarded cash in a zero-interest bank account for twenty years finally deciding to empty that account and distribute the funds to its owners, or using the sale of an old, unused factory to buy back its own stock. It unlocks decades of trapped value.
A Long Runway for Capital Returns
Because of this pressure, the floodgates for capital distribution are opening. Japanese share buybacks and dividends are currently up 250% year-over-year.
Despite this incredible surge, we believe we are still in the early innings. Currently, most Japanese companies are only paying out 40% to 60% of their earnings to shareholders. Compare this to the United States, where companies frequently pay out 100% or more of their earnings to maintain their stock prices, often funding these distributions with debt.
Japanese companies have pristine balance sheets and massive cash reserves. They possess the capacity to sustainably increase payouts for years to come without taking on undue financial risk.
