An 8% share price discount to net asset value on JPMorgan Japanese (JFJ) presents a compelling entry point for a capital growth-focused trust with a strong long-run performance record.

It has a portfolio packed with quality Japanese growth companies with good governance.

Yen weakness hasn’t been helpful to sterling-based investors this year, but this could be changing with the yen rallying and the fund’s performance picking up.

Quality-growth names are finding favour with investors again in a rising market to which Warren Buffet has increased exposure. Luca Paolini, chief strategist at Pictet Asset Management, describes Japanese stocks as ‘a bright spot in an otherwise uninspiring global equity market’.

Shares believes JPMorgan Japanese is a savvy and cost-effective vehicle to gain exposure given ongoing charges of 0.68% are the lowest in the Association of Investment Companies’ Japan sector.

Japanese equities are attractively valued relative to global peers, the market remains under-owned and ongoing corporate governance reforms are a major reason to be bullish on the country, whose economy is being boosted by the belated ending of Covid restrictions combined with modest inflation.

The Japanese government has committed to improving return on equity and shareholder engagement in order to stimulate economic growth and cash-rich Japanese companies are becoming more focused on shareholder returns, offering a powerful market re-rating catalyst.

JPMorgan Japanese’s managers Nicholas Weindling and Miyako Urabe are based in Tokyo along with a large team of analysts, which is a key competitive advantage.

Cumulative share price and net asset value returns have exceeded the TOPIX benchmark this past decade, though the fund has underperformed on both measures over one and five years with its quality-growth style suffering in a tricky 2022.

The positive news is the style has found favour in a rising market in 2023 and last year’s sell-off lowered the valuation of the underlying portfolio, which is now ripe for a re-rating.

JPMorgan Japanese offers exposure to themes including automation, digital innovation, demographic change and world class consumer brands through its portfolio of great companies with high market shares and margins, healthy free cash flow and strong pricing power.

The largest holdings include automation sensors leader Keyence (6861:TYO) and digital innovation play GMO Payment Gateway (3769:TYO). Other stakes include consumer brands Sony (6758:TYO) and Nintendo (7974:TYO) as well as bicycle gears specialist Shimano (7309:TYO) and Uniqlo-owner Fast Retailing (9983:TYO).

Prospective investors are also buying exposure to Recruit (6098:TYO), the country’s number one staffing agency, and incontinence products maker Unicharm (8113:TYO).

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