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作成日: 2025/05/14 08:33

更新日: 2025/12/08 04:11

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Under the Radar: From Deflation to Dividend Machines — Japan's Market Turns a Corner
Tim Melvin

It took more than thirty years, but Japan may finally be on the cusp of a new economic era. After decades of deflation, stagnation, and demographic headwinds, the world’s third-largest economy is showing real signs of life.

If you’re still anchored to the “Lost Decade” narrative, it’s time to adjust your compass.

Start with the big picture: inflation in Japan is finally here, and that is a good thing. After years of trying to nudge price levels higher, the Bank of Japan has achieved something that once seemed impossible, a headline inflation rate over 3% and core-core inflation (which strips out food and energy) around 2.8%.

This is not runaway inflation. This is normalization. It is the end of a deflationary mindset that has kept consumers cautious and wages stagnant. Speaking of which, wages are now rising too, thanks to tight labor markets and a shrinking workforce that has finally given employees some bargaining power. Real wage growth is still lagging a bit, but the trajectory is right.

On the monetary policy front, the Bank of Japan made headlines in March 2024 by finally ending its negative interest rate policy. That marked the first rate hike in 17 years and the symbolic end of an era of extraordinary easing. It also marked Japan’s return to monetary policy normalcy. Gone is the yield curve control regime. In its place is a traditional rate targeting system like those used in the U.S. and Europe. Japan is no longer the outlier. It is rejoining the global financial mainstream.

Even the once anemic GDP growth rate is improving. In 2023, real GDP expanded by 1.9%, with Q4 2024 showing 1.1% year-over-year growth. That may not sound spectacular, but given Japan’s aging population and past headwinds, it’s more than respectable.

The trade deficit has also narrowed sharply, with record exports (particularly in autos) and a booming services surplus. Meanwhile, foreign investment income continues to pile up, pushing the current account solidly into surplus territory.

Then there’s the stock market. Japan’s equity market has finally caught fire. After languishing for over three decades below its 1989 high, the Nikkei 225 finally eclipsed that peak in 2024, closing in on 42,000 and leading the world in equity performance.

That move wasn’t driven by speculative mania, but by real earnings growth, aggressive share buybacks, and long-overdue reforms in corporate governance. The Tokyo Stock Exchange has pushed companies to raise ROE and address chronically low price-to-book ratios. Firms are responding. Cross-shareholdings are down, boards are becoming more independent, and management teams are starting to think more like owners.

Foreign investors are noticing too. Warren Buffett made headlines by boosting his stakes in Japan’s trading houses. Institutions across the globe are following suit, shifting exposure out of China and into Japan. The yen, once battered by interest rate differentials, is now finding its footing as the BoJ lifts off zero.

In KKR’s 2025 Outlook, they specifically highlight Japan as a key opportunity area: “We see opportunities in inter-company holdings. There is an accelerating unwind of Japanese strategic holdings within the corporate sector, encouraging a wave of stock buybacks. Additionally, we advocate for more active capital management, including backing companies transitioning from capital-heavy to capital-light models through Private Equity.”

A stable to strengthening yen, combined with structural reforms and a new era of pricing power, makes for a very interesting setup.

Look, Japan still has challenges. The population is shrinking, productivity growth could be stronger, and public debt remains sky-high. But for once, those aren’t the only parts of the story. Japan has exited the deflation trap. The stock market is not only alive but leading the pack. Policy is normalizing. Corporate governance is improving. Wages are moving. Investors are finally being rewarded.

Bottom line: Japan isn’t the basket case it used to be. It’s becoming a compelling story again—one that belongs in any serious global investor’s playbook. If you’re looking for value, reform, and upside, it might be time to look East. Japan is back in the game.

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