Category: Investing in Japan

Time in the market

With markets looking a little shaky of late, it’s worth remembering the old saying that time in the market beats timing the market. With Warren Buffett once more making news in Japan this week, this post and Bullish Batman’s comment tickled me:

I think readers of this site will have at least a basic understanding of the benefits of compounding on investments. That said, it can take some time to actually experience its power. I have noticed that one of my accounts, which started small and took a while to grow, has picked up momentum in the last 12 months. I haven’t added new money to it for a while but have been diligently reinvesting capital gains and dividends, resulting in a significant acceleration in growth.

Here’s the Investopedia definition of compounding:

I shared a simple example of the Power of Compounding back in 2017.

It’s a great reminder that, although short-term price moves make headlines, we should focus on investing for the long term. Accumulate good assets and hold onto them!

Is Uncle Warren coming back?

Warren Buffett has mastered the art of buying quality stocks and allowing them to compound over the long term. In his recent letter to shareholders, the Berkshire Hathaway CEO commented that he is keen to increase his investment in Japan’s big five trading companies. You may remember that Buffett has been playing a very smart game in Japan, issuing debt at around 1% in yen to buy solid companies that pay around 4% income. Shares in those trading companies surged this week in anticipation that Buffett may be coming back for more.

Despite The Oracle of Omaha’s endorsement, the trading houses still face significant headwinds related to yen movements and Donald Trump’s tariff policies. The US President’s aggressive stance on that issue is unsettling for companies that rely on smooth international trade. It doesn’t seem to worry Buffett too much, though.

Speaking of the yen, on 25 February it hit a four-and-a-half-month high of ¥148 to the dollar. With inflation on the rise, the Bank of Japan will come under pressure to continue to raise rates while the US Federal Reserve has rate cuts on pause for now.

The Corolla index reaches 50%

This is new to me, but this Nikkei Article refers to a Toyota Corolla index. It measures the affordability of a typical mass-produced Japanese car by dividing the price by the average annual income. During the good times, it has been as low as 20% but currently stands at a whopping 50%. For comparison, in the US it is 30%.

This clearly illustrates that, although wages are rising, they are failing to keep pace with inflation in Japan.

Nvidia beats on earnings again

In the US this morning, Nvidia might well have saved markets from severe pain, at least in the short term. The chip powerhouse once more beat analyst’s expectations and issued solid Q1 guidance. The company reported Q4 revenue of $39.3 billion and expects $43 billion plus or minus 2% in Q1. Shares were up +3.7% in anticipation of the report but are down in after-hours trading.

It seems to take a lot to get investors excited these days. Trump is talking about a 25% tariff on chip imports and the AI behemoth is still weathering the DeepSeek storm. You may remember that Nvidia’s previous earnings also beat expectations but the stock fell afterwards.

Is the US economy slowing?

Despite the S&P 500 trading near all-time highs, sentiment in the US is increasingly muted. The downbeat mood is generally attributed to Trump’s tariff talk, however, in this Yahoo Finance article, Neil Dutta argues that it is more likely because the US economy is slowing down. He points to weaker economic data coupled with the Fed’s pause on rate cuts acting as a “passive tightening of monetary policy”.

That argument makes a lot of sense and could also explain why, despite a slew of good news, Bitcoin failed to break back above $100k and has now broken down instead. People who have been ‘waiting for a dip’ are not so keen now they have one. We may have to endure some economic pain to push the Fed to start cutting again before the bull market resumes. (no, I don’t think it’s over)

Also, it’s notable that hedge-fund manager Steve Cohen recently struck a bearish tone for the first time in a few years. You can see a snippet of his interview here. (in case the embedded link below doesn’t work)

Cohen states that he isn’t expecting a disaster, but things could be difficult over the next year or so, and it wouldn’t surprise him to see a significant correction.

All the more reason to keep a long-term view and focus on compounding those assets over time!

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

What’s your Japan plan?

I started this site in 2017 and ran out of things to say about the basics of financial planning some time ago. If you are just getting started, I put together a thread of simple financial planning tips from my early posts, which you can view on X here.

The basics don’t change, but the environment can change drastically. If you plan to live in Japan for the long term, you are probably now figuring out how to adjust from living in a country where deflation was the norm to one where prices are rising. Looking into the future, one of the big questions is whether this inflationary environment will stick, or will Japan be back at zero interest rates and falling prices in a few years? How can we plan when we don’t know the variables we will likely deal with?

Prediction is very difficult, especially if it’s about the future. – Niels Bohr

I have a client who was an economist at a financial institution for many years. He told me he always felt it was his job to have a view. For some reason that has stuck with me and I think it is important in my job too. It’s also important not to be wrong, though! I wish I could tell you I have always held the correct view and never been wrong, but I doubt you would believe me. I have, however, gained some experience over the years, which has helped me develop some skills in dealing with the uncertain future we face.

Strong views, loosely held.

Having a view is helpful but you don’t have to marry it. If something changes or evidence comes to light that proves you wrong, you can simply change your view. Don’t get caught up in the social media battle to be right about everything. In just the last few years, people have pivoted from being epidemiologists to vaccine experts to geopolitical analysts to macroeconomists to AI gurus and now, tariff experts.

It’s exhausting.

So, I thought today I would take a look at some basic data about the Japanese economy and share my view on what a person living here should focus on in terms of financial planning and investment.

Debt is a problem

Japan still has a strong, productive economy but it is not expected to grow fast. The predicted real GDP change for 2025 is 1.1%. (IMF) Government debt to GDP is currently 255%. (Trading Economics)

December 2024 CPI (inflation) was 3.6% and, in response, the Bank of Japan recently increased the overnight interest rate to 0.5%. The 10-year yield on government bonds currently stands at around 1.2%.

Japan is clearly not going to grow out of its debt problem. Demographics do not support the level of growth required to meaningfully reduce the size of the mountain. When governments can’t outgrow their debt, they usually end up inflating their way out. I struggle to see how the BOJ leadership can raise rates high enough to head off this outcome but they will of course delay it as long as possible.

It doesn’t look good for the yen

In January 2023, I wrote a post charmingly titled How screwed is the yen? It actually holds up pretty well for a two-year-old post. The problems facing the currency have not changed very much and we are still hanging around at 155 yen to the dollar.

I have re-read this excellent post by Richard Katz several times: The BOJ, the Fed and The Future Of The Yen. He notes that although the gap between US and Japan overnight rates may close, the gap between the two countries’ long-term yields is unlikely to follow suit, meaning the yen probably won’t recover as strongly as some think it will. Here’s an excerpt from that piece:

Some of the issues people in Japan are facing when planning for their financial future are as follows:

  • Continuing yen weakness
  • Concern that the pension system will not meet their retirement needs
  • Rising interest rates, but not rising too far
  • Negative real rates (interest rates lower than the rate of inflation)
  • Rising wages but negative real wages relative to inflation

People are already feeling the pinch. If you bought rice recently, you know what I mean. Furthermore, prices of 1,656 food items are set to rise this month according to this Japan Times article.

So, what can we do?

If you are a regular reader, I am probably repeating myself, but here are some action items to consider:

Check your base currency – are you really going to spend all of your future money in Japan? Are there big expenses overseas that you are likely to be on the hook for in future? If so, you need to save and invest some or all of your money in that currency. More on that here: What is your base currency?

JPY cash is trash – even if your base currency is yen, you are going to lose against inflation over time if you keep all of your money in the bank. Sure, you need to keep a liquid emergency cash reserve, but everything else needs to go somewhere more productive. CPI was 3.6% in December. The BOJ’s target inflation rate is 2%. How much is your bank paying you in interest?

Fill up tax-free vehicles first – another no-brainer. If you are eligible for NISA and/or iDeCo, they are the first stop for investment money. NISA especially is an incredible deal as you can access the money freely if you really have to. Bad luck if you are a US citizen – you should explore options for investing back home. And remember, if your spouse is eligible, they should be maxing out tax-advantaged options, too.

Yen-cost average – if you are young, regular investment in a global stock index fund/ETF is a perfectly good strategy. You can worry about diversification later.

Learn to diversify – lump sum investments require more care. And the closer you get to spending your capital, the more you need to protect it. Diversification across asset classes (not geographical areas) is how you do this. Own some bonds, stocks (growth, value, dividend), property (physical or REIT), commodities and alternatives. Use a core/satellite allocation to dial up/down risk.

Explore dividend stocks – Japanese dividend stocks offer a great way to keep pace with inflation in yen terms. More here: How to beat inflation with Japanese dividend stocks

Lever up – if you are here for the long run, owning property is still better than renting. Even if you are risk averse, I am still seeing 35-year fixed-rate mortgages at under 2%. Floating rates are still well below 1% and, in some cases lower than 0.5%. It is still very cheap to borrow money for a home in Japan.

Stack gold and bitcoin – the two kings of hard assets and possibly the only satellite holdings you need. Average in over time and hold. More here: Facing inflation – the four assets you should own

A fistful of dollars – if you are the entrepreneurial type, I recommend brainstorming ways to earn money in USD. As the global reserve currency, it will be the last one standing in the Fiat race to the bottom. Read up on the dollar milkshake theory. If you can get paid in bitcoin, even better!

To summarise: have a view, make a plan and adjust it as you go. If you need help, don’t be shy about getting some. You will get better at this with practice.

Top image by tawatchai07 on Freepik

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Pump my bags!

I know I shouldn’t be posting about the guy everyone is sick of hearing about this week, but he’s proving hard to ignore.

I always argue that political changes have far less impact on asset markets than people expect, and I still believe that is true, but you have to hand it to the new Prez – he is pumping everything!

I write this following a highly enjoyable meet-up in Tokyo last night. We finished at a very responsible hour but I can’t say I am firing on all cylinders today – that’s the price of getting old. So, I will try to make this update as quick and painless as possible.

We all know about the flood of executive orders issued in the past few days. Trump sure loves a good fanfare. However, it was his online address to the World Economic Forum that caught my bleary eye this morning:

Trump said he would ask OPEC to lower the oil price and “with oil prices going down, I’ll demand that interest rates drop immediately,” adding that “likewise they should be dropping all over the world.”

Fed chair Jerome Powell will have something to say about that, of course, but it’s clear that Trump’s intention is for the US to lead global interest rates on a downward path. The S&P 500 reacted by notching its first all-time high close of 2025, rising +0.53% to $6,118.71.

Powell is not the type to be bullied and the Fed is actually signaling a slowdown in rate cuts this year as it awaits further economic data. However, the central bank is going to come under a lot of pressure to pave the way for higher asset prices.

Trump wants a booming stock market to brag about.

He wants higher crypto prices, too.

Last night he signed an executive order establishing the Presidential Working Group on Digital Asset Markets. Here are the main points:

  • Secure America’s position as the world’s leader in the digital asset economy
  • Create a federal regulatory framework for digital assets
  • Prohibit the creation of a central bank digital currency
  • Evaluate the potential of a strategic national digital asset stockpile

Hot on the heels of the executive order, the SEC rescinded the controversial SAB 121 accounting guidance, opening the door for banks to custody crypto assets. This one is bigger than many people realise, although it brings new risks as tradfi will surely make the same mistakes crypto lenders made last cycle – you shouldn’t dabble in under-collateralised fractional reserve lending on an asset you can’t print. But no doubt they will try!

The Bitcoin price whipsawed overnight, rising initially and then dumping in disappointment that the order did not explicitly mention Bitcoin or plans to acquire more Bitcoin. The most likely outcome seems to be that the government will hold onto existing crypto assets seized in legal proceedings.

My two cents: traders and Bitcoin maxis have become too fixated on the idea of the Strategic Bitcoin Reserve and are probably going to end up disappointed. However, the new administration’s appetite for clear regulation and openness is a huge positive for the industry. It is probably also going to provide a healthy level of support for the ongoing bull market. Too much good news all at once could easily have led to a Q1 blow-off top.

Let’s hope the shenanigans I wrote about earlier this week in Are you tired of winning yet? were a blip and the new admin will focus on the long-term health of the industry rather than pumping dumb stuff. I can’t say I’m convinced on that one…

Meanwhile in Japan

It’s BOJ day! Japan didn’t get the memo about cutting rates. No shocks this time as the Nikkei Shinbun was ahead of the decision to raise rates to 0.5%, the highest in 17 years. The BOJ expects wages to rise this year with inflation at around 2.5%. Real interest rates are expected to remain negative and policy is still largely accommodative.

The Japanese stock market is calm this afternoon but let’s give it a day or so before we judge the reaction. Part of me hopes for chaos next week and a chance to allocate the rest of my NISA with blood in the streets but I think I would prefer peace and quiet.

All roads lead to inflation?

In the US, the Fed is cutting rates without first scoring a decisive victory over inflation. Trump’s tariffs, if enacted, are likely to be inflationary. The resurgence of inflation appears to pose the biggest risk to markets this year.

With debt to GDP at 263% and little chance of growing out of the hole, Japan seems destined for higher inflation. It’s going to be tough for the BOJ to raise rates high enough to prevent this outcome and the weak yen will only accelerate price rises. JPY cash remains a bad place to hang around for too long.

I covered the four assets to own to face inflation back in late October and I don’t see any change there. Bitcoin, commodities, gold and tech stocks remain the best plays. If you don’t own Bitcoin already, I would caution jumping in at this point in the bull market. I don’t know what innings we are in but it’s certainly not early. If you own it and are planning to exit this year, we are approaching the time to begin averaging out. I sold around a third of my Metaplanet holding just before the inauguration as expectations of something special from Trump drove it close to ¥5,000. Euphoria and hopium should be sold more and more aggressively in my opinion.

The last word on Trump: he loves to brag about stock market performance as proof he’s doing a great job and has even started taking credit for the Bitcoin price. I wouldn’t bet against US stocks and BTC this year while he is in the driver’s seat.

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

2025 – Snakes and elephants

Happy New Year, everyone! Welcome to the year of the snake. Just as we get back in the swing of things, a three-day holiday lies ahead. I watched the news last night and was reliably informed for 20 continuous minutes that it is snowing in the places where it always snows at this time of year. It’s nice when things go to plan, huh?

If you enjoy winter sports, it looks like a great season for it!

It would be nice if the investment climate was equally predictable, but alas, it’s complicated. In many ways, 2024 was smoother than expected. Global stocks gained around 19%, led by the Magnificent Seven and the hype around the AI trade. Japanese stocks kept pace well, although gains were concentrated in the first half of the year and things got a little scary for a minute there in August!

I had a look back and over the year I wrote 26 posts, covering the usual financial planning and asset allocation stuff along with macro views, currency, stocks to watch, crypto, AI, quantum computing and more. I hope it kept you entertained and maybe provided some actionable ideas. I plan more of the same in 2025, with the focus remaining on action. There’s already far too much information out there and the key for me is uncovering what we can actually do with it.

January is prime NISA allocation season and I’m sure many of you are already getting your accounts organised. If you are a ‘keep it simple’ type and have already completed this task, I salute you! Just like the gym, most of the battle is simply showing up and getting stuff done.

If you haven’t started yet, here are some things to consider:

Consensus views

So what is the forecast for 2025? The Bloomberg Outlook is always an interesting read. In short, the ‘experts’ are calling for more of the same: a strong US economy, a continued AI-led boom, albeit with a slightly tempered outlook on stocks.

Smart consensus sees US interest rates continuing lower, a weaker dollar, gold higher, and oil lower, with a mild stock market correction likely, but no bear market. Simple enough!

The potential spanner in the works is inflation reigniting as you know who takes office in the US. For what it’s worth, I think a lot of Trump’s tariff talk is bluffing/negotiating but we will know more in a few weeks. All bets are off if he invades Greenland lol! The inflation risk is a more pressing concern. You may have noticed how slightly stronger PMI data sent rate-cut expectations plummeting earlier this week. The market is near all-time highs, yet ultra-sensitive to the rates higher-for-longer narrative.

Liquidity drives markets. How high will risk assets go? Well, that probably depends on the money supply more than anything else.

Bubble watch

Getting away from the consensus views, this morning I found legendary investor Howard Marks writing about bubbles – his memo here is worth a read.

If you want to skip to the Tldr and know where the potential bubble could be, get a load of this:

So much for Mr & Mrs Watanabe being conservative. In my experience, the average ‘balanced’ Japanese investor has half of their money in the bank and the other half in whatever went up the most last year. And they are buying this with a weak yen???

So, how about Japanese stocks?

Global asset allocators that I pay attention to are still overweight Japan. And why not with USD/JPY at ¥158! There are many positives here in the land of snow in winter, with companies expected to post record profits for the 5th year straight. On average, wages increased +5.1% in 2024 and are expected to rise again this year, which is good news for consumer spending. The question is whether the hikes will keep pace with inflation. Remember, real wages have been down only over the last three years…

Still, there are several good reasons to own Japanese stocks: the TSE has successfully pushed companies to enhance returns for investors, resulting in a marked increase in dividends and buybacks. Companies also continue to unwind cross shareholdings.

Of course, the elephant in the room is the Bank of Japan. Having skipped a December rate hike, the BOJ is poised to continue its efforts to ‘normalise’ in 2025. In true Galapagos fashion, Japan boasts the only developed-world central bank trying to tighten policy this year. If you’re looking for a potential wrecking ball, look no further. A sharp upward move in the yen would severely curtail exporters’ profit. Not to mention the whole carry trade unwind thing. (oh, another elephant!)

On the other hand, banks will benefit from rising interest rates due to improved margins on their loan business. Homeowners won’t enjoy that one so much.

With demand for electric vehicles and smartphones flattening, the semiconductor sector will rely heavily on AI growth. A lot is riding on the rise of the machines.

All in all, though, the outlook is constructive for Japanese equities.

Time for some action!

Ok, I promised some action points. Obviously, I can’t give broad advice here, but this is how I am organising NISA this year:

  • Tsumitate is set and forget. I’m at 40% JPX 400, 30% All Country, 30% NASDAQ
  • Growth – I allocated about a third this week and plan to allocate the rest in the next week or two
  • I am leaning toward a much broader ETF allocation this year rather than trying to pick stocks. The last two years have been too easy – you could just throw darts and the stocks you hit would go up. I’m not convinced it will be so simple this year
  • At ¥158 to the dollar, I will keep a sizeable allocation to Japanese stocks. 1489 High Dividend is a favourite of mine and I also like the 1624 Machinery ETF

Can we forget about Bitcoin now?

Bitcoin has crashed to $93,000. These are desperate times!

If you are new to crypto, allow me to remind you that -30% dips are normal in a bull market. We had a -50% dump right in the middle of 2021. You get used to it, kind of…

If anything, the drawdowns have been mild so far. Unless you own Alts – those dips sting!

If you own crypto, I can’t stress this enough: the best thing you can do is go to sleep for about 3 months. Block out the noise.

I think we are all aware that 90% of what the orange man says is hot air, so if you are relying on the President-elect to send your bags higher, you may be disappointed. However, make no mistake, the new administration in the US is massively crypto-friendly compared to that of the outgoing dinosaur dude. It will be a factor.

The best indicator is right here – keep an eye on it: (chart from MacroMicro)

Money supply has just taken a dip of its own, hence the market reaction. However, it won’t stay down for long. Unless inflation really runs wild, conditions will loosen.

You may think I am nuts. A year ago I wrote The Investment Case for Bitcoin with the price at just under $40,000. Some guy on Facebook called me a scammer and proceeded to spout a bunch of talking points I recognised from mainstream media circa 2017. These people are everywhere and they are brimming with confidence. I wonder if he has any other assets he thinks we should avoid?

Currently, sentiment is remarkably bad for $93k. ‘Crypto influencers’ are stressing over every dip. When we reach the top, these same people will tell you that dips are mathematically impossible and we are going up forever. Welcome to magic internet money musical chairs!

Long term, it’s going way higher than you think against Fiat. Don’t sweat it if you fail to execute a perfect dismount from the bull. Just don’t FOMO in money you can’t afford to sit on for a few more years.

If you haven’t subscribed, feel free to do so to get my posts by email. If you need help, please check out the coaching link, and follow me on X for jokes and details of Tokyo meetups.

I wish you all the best for the year ahead. Let’s make it a sensational one!

Top image by Freepik

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

2024 Final Boss

I don’t mean to think about the Bank of Japan this much.

As we enter December, US markets continue to push to all-time highs and Wells Fargo just got all bulled up and issued a target of $7,007 for the S&P 500 in 2025. Here in Japan, stocks have hardly been in easy mode but are still up around +17% year-to-date. Yesterday, the Nikkei 225 index jumped +1.91% as hopes rose that Japan will be spared the wrath of the incoming US President’s trade controls. These days people seem to love Japan as a destination for investment as much as they do for tourism.

What could go wrong?

The Bank of Japan meets on 18/19 December. For some reason, these dates are marked on my schedule. It must be some kind of PTSD hangover from the July meeting. Remember when they surprised markets with a hike then? I bet you remember the few days that followed. Is Governor Ueda poised to spoil our Santa rally?

Judging by Ueda-san’s recent comments, he aims to avoid any surprises this time around. Earlier this week, he told the Nikkei that rate hikes are ‘nearing’ as economic trends line up with the central bank’s forecasts. The market is interpreting the comments as a signal of a hike with bond yields rising and the yen strengthening against the dollar. In fact, you could say it would be more of a surprise if the BOJ didn’t raise rates this month.

I’m not saying we will see volatility like early August but, once again, Japan’s mainstream financial media seems remarkably calm about the potential impact on markets. With the US in a rate-cutting cycle, tightening in Japan will drive a stronger yen and could lead to another dramatic carry trade unwind. A stronger yen is also not kind to Japanese stocks.

Keep an eye on the Nikkei news for early leaks of the BOJ decision to soften the impact.

What do I care?

Given how quickly markets recovered from the August plunge, it doesn’t seem like there is much to worry about for long-term holdings. However, I once more find myself sitting on some Japanese stocks that have done rather well. And again, I am tempted to take some profits while the going is good. The benefit here is that I could use this money in January to fund my NISA instead of adding more cash. I’m sure I’m not the only one considering this. Imagine how clever we’ll feel if we sell before the meeting, sidestep the crash and buy it all back cheaper in January. (of course, it is never that easy)

Given the possibility of impending central bank shenanigans, the deadline for profit-taking is looming. I’ll give it a few more days and see.

What else is going on?

In other news, Fast Retailing Co. Ltd (9983) shares got a boost as the clothing giant announced a 12.2% rise in domestic same-store sales for November. People must be stocking up on their heat tech!

Donald Trump seems intent on blocking Nippon Steel Corp’s (5401) takeover of U.S. Steel. U.S. Steel released a statement on Tuesday in support of the acquisition. The company is crying for help but foreign takeovers are not a great fit with Trump’s ‘America First’ agenda.

SBI Holdings Inc. (8473) seems to be the beneficiary of the demise of DMM Bitcoin. DMM is giving up the ghost after losing some ¥48.2 billion worth of crypto in a leak back in May. Customer assets will be transferred to SBI VC Trade Co. by around March next year. SBI shares have seen a nice move as a result. One thing about Japanese crypto exchanges – the customers tend to get their money back these days.

Staying with crypto, I’ve joked before that it’s time to sell when hostesses start trading on their smartphones, so make what you will of this post:

Bull market things…

Finally, Saxo has released its annual Outrageous Predictions list, which is always a fun read. Nvidia surging to double the value of Apple, the end of OPEC and Trump blowing up the dollar feature on this year’s list of unlikely, yet intriguing events.

You never know…

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

PlanetDAO: A new approach to preserving Japanese cultural properties

Today, we have a guest post from the team at PlanetDAO. I discovered their Facebook ad last week and was intrigued by their focus on protecting cultural heritage whilst embracing the principles of decentralisation. After exploring their website, I made a modest investment in the Hayama Bamboo Forest House project – not primarily for financial gain, but because I believe in the project and want to be part of it. I’m excited about engaging with the local community and other co-owners.

This is not a paid post, and there are no affiliate links. I’m sharing simply because I admire PlanetDAO’s work and the DAO model.

And now, I will turn it over to PlanetDAO to explain more.

Contributed by the PlanetDAO Team

PlanetDAO was launched to address a growing challenge in Japan: the preservation of cultural and historical properties. As local economies evolve and traditional inheritance patterns shift, many significant buildings risk being lost to time. This innovative model addresses this challenge by connecting global investors with Japanese cultural properties.

The Challenge of Cultural Preservation

Historic properties in Japan, particularly temples and traditional houses called kominka, struggle with maintenance and preservation when local resources can no longer sustain them. PlanetDAO’s mission is to unlock these properties’ potential through the collective participation of a diverse global community.

A Collaborative Model

The model operates in four distinct phases. The process begins with identifying properties and building relationships with local communities during the sourcing phase. In the fundraising phase, opportunities open for interested parties to participate in property ownership. Throughout renovation, the focus shifts to property transformation while maintaining cultural integrity. The operational phase then combines vacation rental management with community engagement.

Participant Engagement

Participants who join the PlanetDAO community become co-owners, part of something larger than traditional property investment. The term “co-owners” rather than “investors” reflects the collaborative nature of these projects. Co-owners participate in voting on key decisions, engage with fellow community members through both digital platforms and in-person events, and play an active role in shaping the future of these cultural properties.

First Success: Ryogonji Temple (PlanetDAO001)

PlanetDAO’s first project, Ryogonji Temple, demonstrates the potential of this innovative approach. Located in the historic Irokawa district, this 170-year-old temple gained recognition as a registered Tangible Cultural Property in 2021. Adding to its historical significance, the stone stairs leading up to the temple have also been recognized as cultural heritage, symbolizing the enduring craftsmanship and cultural richness of the region. Despite its relevance, only four local supporters remained, leaving the temple’s future uncertain.

Through community investment, the project raised ¥34,540,000 for preservation and development. Today, the project has 134 co-owners from 15 countries actively participating in its development. Co-owners engage through regular online meetings and voting, and several have already visited the property in person, demonstrating the genuine community involvement that the model fosters.

The project is now entering an exciting phase, with architects submitting proposals for the renovation. Co-owners will be involved in key decisions throughout this process, maintaining their active role in the property’s evolution. The property is scheduled to open for bookings in early spring 2026.

Current Project: Bamboo Forest House (PlanetDAO002)

The second project focuses on an 80-year-old residence in Hayama’s Kamiyamaguchi district, recognized as one of Japan’s top 100 Satoyama landscapes. The Bamboo Forest House holds historical significance as a former farmer’s residence and a cherished gathering place for local artisans.

The property features an impressive 7,199 square meters of bamboo forest, offering a tranquil retreat from urban life. The surrounding bamboo grove, carefully maintained for decades by the local community, creates a natural sanctuary that embodies traditional Japanese landscape aesthetics.

The project is currently open for investment, with detailed information about participation opportunities available on the PlanetDAO website.

Building Trust in a New Model

While the first project demonstrated the potential of this innovative approach, each new project brings its own challenges. The global nature of the DAO model, which invites participation from people worldwide who share a commitment to cultural preservation, requires building trust across borders and cultures.

Connecting with potential participants who may be unfamiliar with this investment approach takes time and patience. While in-person conversations often help address initial skepticism, establishing credibility in the digital age remains an ongoing journey. This challenge reinforces the importance of transparency and community building in PlanetDAO’s commitment to cultural property preservation.

Looking Forward

PlanetDAO continues to evolve its approach to cultural preservation. The team is exploring opportunities to expand to additional properties across Japan while developing new ways to engage global participants in local cultural preservation.

Those interested in joining this community of cultural preservation enthusiasts, or learning more about current and future projects, can visit the PlanetDAO website. The team welcomes scheduling online calls to share more about their vision and answer any questions.

Disclaimer: This post is for information only. It should not be considered personal financial advice and does not constitute an offer or solicitation to invest in any of PlanetDAO’s projects. Investments like these carry specific risks and readers should conduct their own research before proceeding.

How to beat inflation with Japanese dividend stocks

Deflation in Japan is a thing of the past.

After years of trying to escape the spiral of falling prices, the Bank of Japan seems to have finally succeeded in its goal. The official inflation rate now sits at around 2.5%, and prices have been hiked on everything from electricity to rice. We foreign residents of Japan have long been concerned with how the spending power of our yen is eroded by inflation in our home countries, but now we are facing a new dilemma.

We are losing spending power in yen terms, too.

Holding JPY cash has been unattractive for decades but is a much worse proposition now. However, with Japanese government bonds still yielding very little whilst carrying significant capital risk, there is no ‘risk-free’ way to counter inflation.

Fortunately, Japan is somewhat of a dividend stock haven. Many quality companies offer a solid return on your hard-earned yen, albeit with some price volatility. But how should investors determine which stocks to buy? Let’s explore a few ideas.

How do dividends work?

First, some basics: dividends are the percentage of a company’s earnings paid to its shareholders as their share of the profits. They are typically paid quarterly, but in some cases, they may be paid semi-annually or annually.

Investors often buy stocks anticipating capital growth but dividend income is also valuable. Established companies that pay a stable dividend are in demand globally and nowhere more so than in Japan.

There are a few key dividend dates to look out for:

  • Announcement date – the date a company’s next dividend is announced
  • Ex-dividend date – the day on which a stock trades without the benefit of the next scheduled dividend payment. If the ex-dividend date is 30 March, investors who want to earn the next dividend need to own the stock at least one business day before that date
  • Record date – the cutoff date to determine which shareholders are eligible to receive the dividend
  • Payment date – the date the dividend is credited to investors’ accounts

When checking out potential dividend stocks, the ex-dividend date is the most important one to pay attention to. If you miss that date, you will have to wait for the next dividend. The stock price can also fluctuate significantly around the ex-dividend date. Popular dividend stocks tend to be bought as the ex-dividend approaches and then sell off after the date has passed.

The easy way to collect dividends

If you like to keep things simple, the low-stress way to own the best dividend stocks is through an Exchange Traded Fund (ETF). ETFs are ubiquitous these days and cover all of the major investment themes. Do a search for ‘high dividend yield ETF’ or ‘高配当株’ and you will find plenty of options.

Here are a few examples I found after a quick search in my SBI account (not investment advice):

  • NEXT FUNDS Nikkei 225 High Dividend Yield Stock 50 Index Exchange Traded Fund (1489)
  • NEXT FUNDS Japan High Dividend Equity Active Exchange Traded Fund (2084)
  • One ETF High Dividend Japan Equity (1494)
  • NEXT FUNDS Nomura Japan Equity High Dividend 70 ETF (1577)
  • Daiwa ETF TOPIX High Dividend Yield 40 Index (1651)

Yahoo Finance is as good a place as any to get a simple overview of these ETFs. Then, if you want to know more, search for the company website and read more about the fund strategy, holdings etc.

These ETFs can be purchased in either the growth portion of NISA or a regular taxable trading account. For the tsumitate part of NISA, search for dividend-focussed mutual funds.

Picking stocks

If you want to pick out some dividend stocks for yourself, the top holdings of these ETFs are a great source of ideas. I am no stock analyst but this is how I got started with dividend stocks. I bought the Next Funds 1489 ETF first and then I went to the ETF page on the issuer’s website and found that you can download the full list of holdings there. (see information on underlying investments) Then, I did some research and picked out a few stocks I wanted to own directly.

Looking through the holdings in the ETFs listed above, it is clear that several industries tend to foster good dividend stocks (again, not investment advice):

  • Pharmaceutical/healthcare: names like Takeda Pharmaceutical Company Ltd (4502) and Astellas Pharma Inc (4503) yield over 4% p.a.
  • Trading companies – Warren Buffett has acquired around a 9% stake in each of Japan’s big five trading companies. He borrows yen at around 1% and collects his dividends, which are between 3-4%. If you are looking for ideas outside of the big five, perhaps take a look at Sojitz Corp (2768) or Kanematsu Corp (8020)
  • Steelmakers – Nippon Steel Corp (5401) has been in the news due to its proposed acquisition of US Steel, but it is also a highly rated dividend stock. Kobe Steel Ltd (5406) and JFE Holdings Inc (5411) are also good plays.
  • Banks – Japan’s megabanks are known as solid dividend payers and even upstarts like Seven Bank Ltd (8410) pay a nice income. Be aware that banks are sensitive to Bank of Japan interest rate decisions though.
  • Shipping Companies – Japan’s big three shipping companies also feature prominently in the dividend ETFs. They are Nippon Yusen Kabushiki Kaisha (9101), Mitsui O.S.K. Lines Ltd (9104), Kawasaki Kisen Kaisha Ltd (9107)

This is by no means an exhaustive list and good dividend stocks are not limited to the industries mentioned above. Perhaps the most popular Japanese dividend stock is Japan Tobacco Inc (2914) – interestingly that stock has been down a bit recently due to some legal issues in Canada. Remember that the price of dividend stocks can and will go up and down. However, as long as you keep hold of them, you will be paid your dividends.

As for the question of ETFs vs. picking your own stocks, keep in mind that ETF holdings will be regularly updated depending on the particular ETF’s criteria. Over the shorter term, you will mostly find the same companies but the weighting of each stock will change. Picking stocks can be fun, but buying an ETF saves you from having to do detailed analysis whilst providing broader exposure.

In summary:

  • JPY cash is trash, inflation will eat up your spending power
  • ETFs are a great way to get started with dividend stock investing and, for most people, offer the most straightforward option
  • One way to find individual stocks is to dive into the ETF holdings to see what their top positions are
  • Do your own research on stocks from industries known for paying steady dividends
  • Bonus: look out for companies that have a record of increasing their dividends year after year

Happy hunting and let’s pump up that spending power!

Top image by rawpixel.com on Freepik

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

All aboard for the Tokyo Metro IPO!

Last week, a reader suggested I write a post about the upcoming Tokyo Metro IPO. This seemed like a great idea, except I have paid precisely zero attention to the offering and would have to spend some time getting up to speed. I don’t really know much about IPO processes and generally see them as a scheme where retail investors provide exit liquidity to venture capital while banks make off with huge fees. Hmmm, I thought maybe I’ll look into it when I have time…

Then, the next day, my wife texted me from work about it. She works with a couple of shrewd investors who were excited about the IPO. Ok, now my wife wants to participate, so I really do have to figure out what the deal is!

First of all, this is clearly going to be a popular offering. You don’t have to be a high-level analyst to determine that the Tokyo Metro is profitable and occupies huge swathes of prime Tokyo real estate. Additionally, this is not a start-up exit to public markets. The Tokyo and national governments are selling half of their holding to the public. (the central government plans to use the proceeds to repay reconstruction bonds issued after the 2011 Tohoku earthquake and tsunami)

What’s the deal?

Tokyo Metro Co. Ltd will be newly listed on the Tokyo Stock Exchange on Wednesday 23 October, 2024. In total, 232,400,000 shares of common stock will be sold to the public. An additional number of shares may be offered depending on demand.

How to participate

Investors who wish to participate can apply through participating securities companies during the application period. If you have an online brokerage account, you will most likely find advertisements and guidance for the offering when you log in.

The price of shares will be determined through a ‘bookbuilding’ process, which is a method to gather investor interest and determine the final price based on demand. The bookbuilding period will be from 8 October to 11 October. This is when you submit your purchase request via your brokerage account. The minimum number of shares you can apply for is 100 – and increments of 100 thereafter. The indicative price per share is ¥1,100. This means the IPO would raise ¥319.55 billion, giving the company an overall value of ¥639.1 billion.

The final offering price and the number of shares to be allocated will be announced on 15 October and the actual public offering period runs from 16 October to 21 October. This is when participants need to deposit sufficient funds to pay for the shares in their brokerage account – make sure you follow the instructions here or you will end up missing out.

There is no guarantee that participants will be allocated all of the shares they apply for. It will depend on the demand for the offering.

Need more info?

For those interested, a Zoom webinar will be held on 3 October at 14.00. You can find details of the offering and a Zoom link here.

About Tokyo Metro

Tokyo Metro operates an extensive subway network with 9 lines mainly in Tokyo’s 23 wards. The most used stations are Ikebukuro (2.487 million daily passengers), Shinjuku (2.165 million), and Shibuya (1.955 million). Total average daily ridership in 2023 was 6.574 million passengers.

The real estate business manages many major properties, including Shibuya Stream, Shibuya Scramble Square, and Tokyo Plaza Ginza. There is also the Shinjuku West Gate Area Project, which is scheduled for completion in 2029.

Tokyo Metro also operates retail businesses such as Echika, a shopping street in some of the metro stations. In-station advertising is, of course, another major business area.

Show me the money!

Tokyo Metro suffered a severe drop in revenue during Covid, but recovered to 95% of pre-pandemic levels by July 2024. The return of inbound tourism, increased population and infrastructure investments played key roles in the recovery.

As part of its growth strategy, Tokyo Metro is focussing on improving accessibility and expanding partnerships with other transport services to increase ridership.

A new trip-planning app is planned for launch this year along with an updated rewards program for frequent passengers – gotta have a point card strategy in Japan!

Tokyo Metro aims to integrate its services better with tourist facilities and provide tailored travel experiences via the app. This is part of the strategy to create more reasons for passengers to use the metro, especially for leisure and tourism. The company is also promoting more contactless payment methods, such as QR codes and credit cards, to streamline fare collection and enhance convenience for passengers.

Tokyo Metro is also working on the expansion of certain metro lines, including the Yurakucho and Namboku lines, which are projected to be completed by 2030.

What to expect from the investment

The share offering is clearly going to be in high demand, with investors looking for a long-term position in a profitable business with a solid dividend. (I’m hearing rumours of a dividend around 3.5% but no idea how accurate that is) There will always be plenty of passengers/customers and the real estate value alone makes the company highly attractive.

On listing, I can imagine a scenario where the share price increases significantly in the first few weeks/months. That may well be followed by a correction in price. Many will view this as a trading opportunity, but remember that you will be trading against every investor in Japan (and many abroad), all of whom will think they have come up with a winning strategy!

My view is that Tokyo Metro will be a solid long-term hold, but admittedly the temptation to sell the initial rally to buy back lower will be strong. If you are going to do so, it’s probably better to be first!

So, there it is. If you are looking to get involved, check your brokerage account and make sure you are prepared to make your bid on 8-11 October.

Best of luck!

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Turning point

So, here we are. Overnight, the Federal Reserve announced a rate cut of 50bps, the first cut in four years. Projections imply a further 50bps later this year and another 100 bps in 2025. Welcome to the rate cut cycle.

US markets reacted cautiously, with stocks rising ahead of the announcement only to give back those gains and close down slightly. 50bps is considered a big initial cut, so it will be interesting to see how markets behave over the next few days as they digest the news.

Surprisingly, the yen fell against the dollar to the upper ¥143 range and Japanese stocks were up strongly this morning. Again, time will tell if the initial reaction is the correct one.

The macro gurus will no doubt be fighting it out as to whether the US economy is coming in for the much-vaunted soft landing or heading for recession. Jerome Powell sounded upbeat on America’s economic prospects and made clear that he views the larger cut as a move to prevent the Fed from falling behind.

We will find out in due course.

Sometimes the most obvious take is the correct one: rate cuts are generally bullish for risk assets over time, although we may need to ride out some volatility in the short term. The doomers will keep dooming but optimists make more money in the long run:

“Bulls make more than bears, so if anything being an optimist about life and about things in general is a great attribute as an investor. You just can’t be starry-eyed and naive.” — Stanley Druckenmiller

Deja vu

Three assets that are a hot topic in this new environment are gold, silver and bitcoin. It’s funny because I remember these three getting a lot of attention four years ago. Granted, the post-Covid crash environment in 2020 was very different from today – for a start, the Fed funds rate was already at zero in September 2020. However, it’s interesting how things move in cycles. Gold is around all-time highs now and silver enthusiasts are clamouring for a breakout. It has a strong 2020 feel to me, so I thought I would take a look back and see what happened four years ago.

Observe the five-year charts:

As you can see, both gold and silver reacted quickly to the stimulus injection that followed the March 2020 Covid shock. Liquidity is generally good for hard assets. Bitcoin took longer to catch alight but when it did, the fireworks were spectacular as it took out the previous all-time high of $20k and then marched right on to $60k and then $69k in 2021. That move started at $6k at the end of March 2020 and BTC was still only $11k on 19 September 2020.

I like all three of these assets in the current environment, but I like one much more than the others.

Game time soon, anon.

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.

Semiconductors, online banks and Shimamura

As another quarter rolls around, it’s that time again. Yes, the main event this week is, of course, the Nvidia Corp (NVDA) earnings report. Once more, expectations are sky-high and, if the chipmaker fails to meet them, the market mood could sour in a hurry. We find out if the AI bull market narrative remains intact on Wednesday night.

Q1 revenue was a whopping $26 billion with guidance of $28 billion for Q2. Wall Street is expecting even more than that with the average analyst estimate coming in around $28.6 billion. Questions have been asked of this company before – can it deliver again?

US tech stocks are trading warily ahead of the report but the Dow Jones Industrial Average managed to put in another record-high close on 26 August.

In Japan, a Nikkei report says that Resonac Holdings Corp (4004) will make a ¥30 billion investment to improve the performance of power semiconductors used in electric vehicles and other devices. This follows the announcement in early July that Resonac will form a consortium with nine other Japanese and US firms to collaborate on the development of semiconductor technologies for generative AI.

Shares in IOT service developer Future Innovation Group Inc. (4392) went limit up today. The jump follows an announcement that FIG’s subsidiary Realize’s transport robot will be deployed in a semiconductor factory run by Rapidus. Rapidus is working on the domestic production of cutting-edge logic semiconductors.

Online banks are picking up customers

The Nikkei also reported today that online banks have doubled their total number of accounts over the last five years. The six major online banks now boast over 40 million accounts as of the end of March 2024, up 13% from the previous fiscal year. The net banks are taking on traditional banks by linking up with point-based ecosystems and smartphone payments and are also providing systems to external companies.

Rakuten Bank Ltd (5838) and SBI Sumishin Net Bank Ltd (7163) gained +5.2% and +5.3% respectively today on the news.

Selling megabank shares to buy net banks could be an interesting trade. However, investors need to keep in mind that rising interest rates and increased competition could slow the growth of the online banks, particularly those that are reliant on low-interest home loans.

Meanwhile, Paypal’s Solana-based stablecoin, PayPal USD (PYUSD) reached a $1 billion market cap just 383 days after its launch, making it the sixth-largest stablecoin.

In other business

If semiconductors and online banks are too flashy for your risk profile, take note that purveyor of high fashion (ok, I jest), Shimamura Co Ltd (8227) reported a 5.5% increase in same-store sales for August compared to the same month last year. This marks 10 consecutive months in which sales have beaten the previous year’s results. Shimamura’s five-year chart isn’t too shabby and it pays a 2.4% dividend. Money in the bank!

Disclaimer: This should go without saying, but the information contained in this blog is not investment advice, or an incentive to invest, and should not be considered as such. This is for information only.