Japan Equities 3Q26 | Selectivity in the Rough
Selectivity is key. Japan’s equity performance since March has been largely led by the technology complex – particularly AI and semiconductor – which has helped to offset weakness i...
Chief Investment Office - Hong Kong version26 Jun 2026
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Selectivity is key. Japan’s equity performance since March has been largely led by the technology complex – particularly AI and semiconductor – which has helped to offset weakness in sectors exposed to the Middle East conflict. Strong corporate earnings momentum and improving shareholder return policies have remained key tailwinds for Japan equities.

Looking ahead, with elevated valuations and fiscal worries pushing bond yields higher, performance divergence across sectors is likely to intensify. Structural winners supported by strategic investments and ongoing corporate reforms are expected to outperform, while sectors facing margin compression from higher input cost due to supply disruption and raw material shortages stemming from the conflict may lag. Against this backdrop, selectivity will be crucial in the coming quarter.

From value to strategic. Warren Buffett’s investment in Tokio Marine Holdings reinforces a constructive stance on Japan equities by signalling a shift from broad valuation plays to high-conviction, sector-specific allocations with structural earnings power. The deal underscores confidence in Japan’s improving corporate governance, balance sheet efficiency, and shareholder returns, while highlighting insurance as a compounding engine via underwriting profits and float generation. For investors, this validates a more selective positive stance to Japan, particularly in financials and globally competitive sectors, where earnings visibility is strengthening and valuations remain relatively undemanding versus developed markets. In essence, Buffett’s move suggests Japan is no longer just a cyclical value trade, but an increasingly strategic, long-duration allocation within global portfolios.


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