Global investors and even Japanese citizens are woefully although understandably under allocated to Japanese stocks. Why? For most of our “investment” lifetimes, the island nation has been a place to avoid, with equities (Nikkei 225) still unable to fully recover from the Japanese bubble that popped 25-years ago. From the 1989 top to the 2009 bottom, Japanese stocks lost 83% of their value. Even despite recent gains, a $1 million Japanese equity investment made in 1989 would be worth $500,000 today compared to $6 million if invested in U.S. stocks (S&P 500). And that pain wasn’t merely limited to a bad investment made during a narrow window in late 1989. The same investment into Japanese stocks made 6 years later (the typical length of a normal business cycle) would still be down 1% compared to a 350% gain here stateside. Is there any wonder why investors love U.S. stocks and seemingly despise the third largest economy on earth?

 

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