Profit picture brightens for Japan, Fidelity manager says

Eileen Dibb cites corporate restructuring and pro-business government initiatives.

Diana Cawfield 5 April, 2018 | 5:00PM

The Japanese stock market should continue to do relatively well as long as earnings continue to grow, says Eileen Dibb of Fidelity Investments, who manages Fidelity AsiaStar and Fidelity Japan. When Dibb and her colleagues look at equity valuations across the board in Japan, stocks generally look fairly valued at this time.

"Changes in Japan for corporate governance, and the administration of Japan's prime minister, Shinzo Abe, have pushed companies to become more profitable," says Dibb, who is based in Rhode Island. "We're talking about ROEs (returns on equity) that have expanded 8% or 9% in companies that have really gotten religion around restructuring and profitability and shareholder returns." Government initiatives that been positive developments for Japanese business include monetary stimulus, increased public spending, and economic reforms to boost corporate earnings.

Looking back historically at Japan, Dibb says that after the Japanese market "bubble" that burst in 1990 and the nearly quarter-century bear market that ended about 2013, valuations came down to a reasonable level. The strong global economy is also a positive factor.

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Diana Cawfield

Diana Cawfield  Diana Cawfield is an award-winning writer who has been a regular Morningstar contributor since 2000. Her numerous publication credits include the Toronto StarAdvisor's Edge and Chatelaine, as well as the Canadian Securities Institute's online educational services.

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