Spoiler alert: “Japan could represent one of the most interesting and evolving opportunities in global equities today”. A conclusion made in this week’s Investing on the Go podcast from Fund Calibre, where the team were joined by Alison Henry, investment specialist in Japanese equities from Baillie Gifford.
This episode explores the changing investment landscape in Japan and why it may be entering a new era of growth.
With deflation ending, wages rising and corporate governance improving, companies are being pushed to deploy capital more efficiently. Alison Henry – Baillie Gifford, highlights opportunities in mid-cap innovators, the growing influence of artificial intelligence and Japan’s leadership in robotics and automation.
Also examined was how companies are adapting to technological disruption and the role of global volatility in portfolio decisions.
Why you should listen to the interview: If you still think of Japan as a slow, stagnant market, this episode will challenge that view.
It breaks down the structural changes driving growth, highlights under-appreciated opportunities in innovation and explains how major global themes like AI are playing out differently – and potentially more attractively – in Japan.
This interview was recorded on 16 April 2026. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
A powerful setup for a reappraisal of Japan
“So the drivers of return are changing and, for us as growth investors in the Baillie Gifford Japanese fund, I think three tailwinds matter.
“When we think about Japan and the new backdrop, deflation is finally over after 30 years. It’s been a long time, but we’re now seeing prices increase and nominal wage growth is at an all-time high.
“And this matters because it supports consumption, which supports profitability for companies and gives them the confidence to raise wages or raise prices. An example would be Tokyo Metro, which we have in the portfolio.
“It’s successfully raised its prices for the first time in 30 years. We bought the stock at IPO at the end of last year.
“The second is Japan’s cash hoarding culture is changing. In an inflationary world, holding cash is now costly, and that means there is a powerful incentive for capital to move into equities.
“It’s a similar picture for corporates. Corporate governance reforms are pushing companies to reduce their huge cash piles and put their balance sheets to work.
“Then third is valuations. Valuations are still very attractive. Japan continues to trade at a discount relative to its European or US peers, yet you’re still getting strong earnings growth.
“Put together, we think all of that is a powerful setup for a major reappraisal of Japanese equities.”
This is a genuinely new era for Japan
“We’ve talked about the inflationary environment – the first time we’ve seen inflation in 30 years – but it’s not just that. The Bank of Japan has also been successfully raising interest rates.
“They started that in 2024 after 17 years of no hikes. Interest rates are now at 0.75%. That might not sound high, but 10 years ago they were negative, so this is huge progress for Japan.
“Then there’s the corporate governance backdrop. Companies are reducing cash, unwinding cross holdings, and increasing buybacks to boost earnings per share.
“For example, we met with Shimano and discussed their balance sheet…they have a third of their market cap in cash.
“We’re encouraging them to reduce that. Another example is Keyence, which recently divested its stake in KDDI. So there is actual change happening, and that’s making companies much more attractive for investors.”
AI is transforming Japan’s robotics leadership
“AI is such a big topic, for clients, for the team, and when discussing stocks. In Japan specifically, AI is hugely important because of the demographic situation, an aging population and shrinking labour force.
“There’s an attitude of optimism: we need AI.
“One area we think is really exciting is robotics and automation. Japan has always been a leader in robotics, but previously robots delivered brawn without the brains.
“They could perform precise tasks, but didn’t understand what they were doing. That’s now changing thanks to AI. Robots can interpret their surroundings, take natural language instructions, and adjust their movements with purpose.
“Japan already supplies almost half of all industrial robots worldwide. Domestically, it has more than 400 robots per 10,000 manufacturing workers, twice the global average.
“So there is a huge opportunity here, and we have exposure across a range of companies, from long-standing names like Fanuc and Keyence to newer additions like Yaskawa and Harmonic Drive.”
AI creating opportunity, not just risk
“Most companies in the portfolio could theoretically be threatened by AI, so these are conversations we’re having with management teams: how are you using AI, what’s your attitude towards it?
“I was in Japan recently and we discussed AI in at least half of the meetings. One example is Money Forward, a software-as-a-service company.
“There’s been concern that AI could threaten its business model, and we’ve seen share prices fall because of that, what’s been called “SaaSmageddon”. But actually, Money Forward is ahead of the game.
“In Japan, it’s difficult to lay off staff, so instead they’re retraining employees to become AI experts. So rather than being disrupted, we think they’re well positioned to benefit.”
Innovation at a discount
“The biggest opportunity is the revived macro backdrop and the growth that we think is not fully appreciated by the market.
“If you look at many of the innovative or disruptive companies in Japan, if they were US companies, they’d be trading on very high multiples. But in Japan, they’re not.
“So you’re essentially getting innovation at bargain prices, with very attractive forward earnings growth compared to the index.
“In terms of misconceptions, many still see Japan as a sleepy country that lost its way after 30 years of deflation. But actually, it’s quite the opposite.”
Conclusion: Japan’s investment story is shifting in ways many investors may not yet fully appreciate. With structural tailwinds building, the market offers a blend of growth and value that is increasingly hard to ignore.
For those willing to revisit old assumptions, Japan could represent one of the most interesting and evolving opportunities in global equities today.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The writer’s views are their own and do not constitute financial advice.
This information should not be relied upon by retail clients or investment professionals. Reference to any particular investment does not constitute a recommendation to buy or sell the investment.
Main image: Japan, cherry blosom, sora-sagano-8sOZJ8JF0S8-unsplash
