Introduction to Japan

Japan funds focus on companies that are domiciled in Japan. These could be companies that generate the majority of their revenues domestically or those that have extensive revenues from outside Japan. The Tokyo stock exchange is the third largest in the world and investors can choose from a broad variety of sectors and company types.

The benchmark indices are the Nikkei and the Topix. Among the major constituents of the Nikkei are the consumer electronics giants of Panasonic, Toshiba and Hitachi, but the index also contains automotive groups such as Honda and Nissan, banking and retail stocks, plus a wide variety of other sectors. Japanese companies are increasingly exposed to the growth in China.

Largely because of the preponderance of big-name exporters, Japanese markets tend to be 'cyclical', more sensitive to the global economic outlook. The Japanese markets may rise faster than other developed stock markets at times of economic expansion, but may fall further than other stock markets at times of risk aversion among investors. However, Japan is the least correlated of all the major markets and will not always perform in line with, say, the FTSE 100 or S&P 500. It can therefore act as a useful diversifier in a portfolio.

The tax treatment of investments is subject to tax law and HMRC practice which are subject to change. The value of investments may be affected by exchange rate movements where the underlying investments are not denominated in Pounds Sterling.


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