Schroder Japan Trust beats benchmark amid favourable market conditions

Schroder Japan Trust PLC on Tuesday reported strong net asset value growth for financial 2026 following favourable market conditions and "astute" stock selection.

The London-based investor in Japanese equities said net asset value per share stood at 406.76 pence at July 31, up 36% from 298.35 pence a year earlier.

NAV total return for the financial year ended July 31 was 41%, up from 6.8% the previous year, outperforming its benchmark, the Tokyo Stock Price index, by 29%.

Schroder Japan declared a fourth interim dividend of 4.07 pence per share, up 43% from 2.85 pence a year earlier.

"Performance was driven by a combination of favourable market conditions and the investment manager's astute stock selection," Schroder Japan explained. "Japan's equity market benefited from continued corporate governance reform, a return to sustained wage growth and inflation, and an improving political backdrop following the formation of a new coalition government under Prime Minister Takaichi.

"Against this backdrop, the portfolio's focus on undervalued, well-positioned businesses - particularly among smaller and mid-sized companies, where valuation anomalies remain more pronounced - continued to deliver strong returns."

Top contributors included Ibiden Co Ltd, with a 1.9% portfolio weighting and 3.2% total return effect, as the market recognised its dominant position in substrates for AI chips. JX Advanced Metals Corp contributed 2.3%, Fujikura Ltd 2.7%, Nintendo Co Ltd 1.4% and Rigaku Holdings Corp 1.2%.

While top detractors included Asahi Group Holdings Ltd, down 1.0% after a cyberattack disrupted operations. Advantest Corp detracted 1.3%, while Mitsubishi UFJ Financial Group Inc and Murata Manufacturing Co Ltd detracted 1.1% and 1.0%, respectively.

Looking ahead, investment manager Masaki Taketsume highlighted the contrast between Japan's improving domestic picture with the "uncertain" external environment.

"Japan combines improving corporate behaviour, a more supportive nominal growth environment and a broad range of under-appreciated businesses," Taketsume said. "Although geopolitical risks, fiscal concerns and elevated valuations in certain areas may keep volatility high, the structural case for Japanese equities remains intact."

As a country that imports the vast majority of its energy, Japan is particularly susceptible to fluctuations in energy prices. Taketsume also noted US trade policy and elevated tarriff levels as potential headwinds for exporters and global growth.

"In this environment, with such a wide range of valuations available across a deep opportunity set, Japan should be a market that rewards astute stock selection. With a proven, high-conviction approach and prudent use of gearing, we remain confident that our focus on companies with strong franchises, visible self-help potential and attractive valuations can continue to create additional value for the company's shareholders.

Shares in Schroder Japan were up 0.8% at 393.00 pence on Tuesday in London.

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