Shiozumi: Japanese growth will ‘sharply decelerate’

Mr Shiozumi, manager of the £91.1m Legg Mason Japan Equity fund, said the Japanese economy will suffer lower growth levels in line with slowing growth in the global economy.

He added that the yen’s strength against the dollar and the euro, along with flooding in Thailand, would keep its GDP at a subdued level.

But he said: “In the next fiscal year to March 2013, the economy is expected to grow by roughly 2 per cent on the back of an increase in demand for rebuilding disaster hit areas.”

The fund is top of the IMA Japan sector over one and three years, returning 70.2 per cent over the three year period to November 4, compared with a sector average of 15.1 per cent, according to Morningstar.

But it ranks bottom out of 44 funds in the sector over the five year term, delivering a loss of 33.1 per cent, compared with a sector average loss of 12.1 per cent.

The manager also warned that monetary tightening policies in emerging economies in Asia could damage Japan’s prospects for future growth.

“If emerging economies in Asia will continue to take money tightening policies, Japanese exports will then by negatively affected by a slowdown in their economic growth,” he said.

Mr Shiozumi said he had increased his exposure to internet-related and healthcare sectors to take advantage of Japan’s ageing population and a “broadening internet-oriented economy”.

The yen’s sharp rise against the dollar has been a concern for the Japanese Central Bank, which kept interest rates at near zero levels last week.

Mr Shiozumi said he expected the yen to remain at current levels against the dollar, but he said, “The yen’s outlook depends on the financial and economic situations in Europe and the US.”

John Millar, manager of the Martin Currie Japan fund, last week told Investment Adviser that “more than 70 per cent of companies listed on the Topix now trade below book value, while 85 per cent offer a dividend yield in excess of the yield on 10-year bonds”.

“The point of capitulation in forecasts is the point at which this value can start to be crystallised. So we will be watching the results season very carefully,” he said.

“In the meantime, it is worth pointing out that Japanese equities appear to be much more advanced in this process than their peers in other markets.”