Die japanischen Aktienmärkte legten im April eine Trendumkehr hin und verzeichneten deutliche Kursgewinne. Von dieser freundlichen Markttendenz konnte auch der CT (Lux) Japan Equities IE EUR (WKN A3ERN9, ISIN LU2656574600) profitieren, der im Berichtsmonat eine positive Rendite von +5,22 Prozent verzeichnete. Zu den besten Performern im Portfolio gehörten Kioxia und Tokyo Electron, zugleich wurden neue Positionen bei Advantest und Mitsbishi Electric eröffnet. FondsManager Daisuke Nomoto berichtet in seinem Monatskommentar, welche Veränderungen im Portfolio des Japan-Fonds vorgenommen wurden und wie die weiteren Aussichten für den japanischen Aktienmarkt einzuschätzen sind.
Market Background
Japanese equities bounced back strongly in April, with the benchmark MSCI Japan index rising 7.5% in yen terms.
The bulk of the monthly rise came in the first half of April and was driven mainly by optimism over the prospects for a peace deal between the US and Iran – or at least by relief that the conflict had not continued to escalate. A two-week ceasefire announced on 7 April came with only hours to spare before President Trump’s deadline; he had previously threatened to obliterate Iran’s infrastructure if a deal to reopen the Strait of Hormuz had not been reached by that point. The resulting relief rally in stocks coincided with the biggest one-day drop in oil prices since the early stages of the pandemic.
In the subsequent days, however, the Strait remained closed amid disputes and there was little concrete progress in peace talks while oil prices climbed again. Nevertheless, the MSCI Japan lost only a little ground and finished the month with strong gains. The rally was concentrated however, with gains driven by mega-cap momentum stocks with expensive valuations. This was reflected by the Nikkei to TOPIX (NT) ratio reaching a record high in April. The Nikkei outperformed due to its heavier exposure to large-cap stocks with higher valuations – particularly within the technology and AI-related sectors. These areas benefited from strong foreign inflows and were further bolstered by strong earnings from US tech giants.
In terms of economic data, Japan’s flash composite purchasing managers’ index (PMI) for April pointed to weakening growth, due to a slower expansion in services. Growth in manufacturing accelerated, though there were signs that this was driven by a rush to build inventories before anticipated price rises and supply-chain disruption due to the Iran war. The surveys reported sharply rising input costs and low levels of business confidence. In separate data, meanwhile, core inflation (excluding fresh food) came in higher than forecast in March, year over year. ‘Core core’ inflation (also stripping out energy costs) fell. Against this backdrop, the Bank of Japan (BoJ) kept interest rates on hold at its policy meeting near month-end. While this was widely anticipated, the vote split was seen as hawkish, with three of the nine policymakers calling for a hike. The BoJ also revised up its inflation projection but reduced its GDP forecast for the 2026 fiscal year, and said the risk of an inflationary overshoot outweighed the risks to growth. At month end, markets were pricing in a significant chance of a rate hike at the next meeting in June.
Within the MSCI Japan, growth stocks strongly outperformed value as mentioned. Technology was by far the strongest sector, accounting for more than quarter the index’s return. Materials and communications services also outperformed. Conversely, the defensive utilities, consumer staples and healthcare sectors posted losses as investors sought higher-beta names. Energy was the weakest performer. The sector gave back some of its stellar gains from March but had only a modest impact on returns given its relatively small weighting in the index.
Performance
Gross of fees, the fund underperformed its benchmark. Both allocation and selection effects were unfavourable. April rewarded expensive, volatile, high momentum mega caps, especially perceived “AI winners” along the supply chain. While we remain constructive on AI as a long term structural theme, this environment proved challenging for our valuation sensitive investment style, which seeks to balance growth opportunities with discipline on price and fundamentals.
Technology, energy and industrials were the biggest relative detractors by sector, mainly due to selection effects, though the overweight in energy and underweight in technology also hindered performance. Consumer discretionary was the top contributor, with selection effects adding value. Stock picks in healthcare were beneficial, as was the underweight positioning in consumer staples.
Key stock-level relative detractors included the underweights in Advantest and SoftBank Group and the overweight in Inpex. Advantest manufactures semiconductor testing equipment, while SoftBank is a global technology investment holding company. Both stocks rallied over the month, supported by a broader wave of positive sentiment towards AI-related names across the sector. Inpex, Japan’s largest upstream oil producer, was pressured as news of a ceasefire in Iran brought oil prices down, weighing on energy stocks.
Contributors included holdings in Kioxia, Tokyo Electron and the lack of exposure to Mitsubishi Corporation. Shares in computer memory manufacturer Kioxia surged as rising NAND flash memory prices, reinforced by strong AI-related demand and boosted earnings expectations, lifted the firm into Japan’s top ten companies by market capitalisation for the first time following its 2024 initial public offering. Semiconductor and electronics company Tokyo Electron also helped relative performance, as the shares benefited from the aforementioned positive sentiment in the AI space. A lack of exposure to Mitsubishi Corporation added value as the shares declined amid broader market weakness, driven by falling oil prices and a rotation away from resource-linked stocks.
Activity
We exited lower-conviction positions, including heavy-industry manufacturer IHI and Anycolor, operator of the Nijisanji virtual-YouTuber agency, and redeployed capital toward higher-conviction beneficiaries of AI-related capex – namely Mitsubishi Electric, Amada and Advantest.
We initiated an underweight position in semiconductor testing equipment manufacturer Advantest, shifting semiconductor exposure from the front end to the back end, which is better aligned with the downstream effects of AI-driven capex. This position also reflects a risk management consideration, given the stock’s significant weight in the benchmark.
Mitsubishi Electric, an electrical and electronic equipment manufacturer, strengthens the portfolio’s exposure to AI, data centres, automation and defence. The company is actively working to improve its earnings profile through measures such as repricing contracts and reducing fixed costs, and we expect these initiatives to support profitability over time.
We also added Amada, a manufacturer of metal processing machine tools. We have a constructive view on its earnings outlook, supported by its exposure to automation and structural capital expenditure demand, as well as management’s proactive approach to shareholder returns.
Outlook
We expect Japanese equities to be supported throughout 2026 by a multiyear structural upcycle still in its early stages, underpinned by reflationary dynamics, rising wages, continued corporate governance improvements, and a steady shift of household assets from savings into investment. After decades of deflation that crippled Japan’s economic growth, moderate inflation is now viewed as beneficial. Rising prices are catalysing a positive economic cycle by motivating Japanese corporations to pursue growth oriented investments and improve capital efficiency – breaking the cautious, cash-hoarding behaviour that previously hindered expansion and productivity gains.
Japanese markets have rallied following Sanae Takaichi’s appointment as Prime Minister, driven by expectations for “Sanae-nomics” – a growth-oriented economic strategy echoing the transformative Abenomics policies of the past decade. The established coalition following the recent election further solidifies the governing bloc and promises enhanced investment in Osaka, Japan’s second-largest metropolis, creating significant investment opportunities. Several catalysts, including enhancements to the corporate governance code and a broad economic security roadmap covering defence, cybersecurity, quantum technology, critical minerals, nuclear power and energy, are expected going forward and should reinforce investor confidence. In geopolitics, periodic tensions with China have historically had only limited and short-lived effects on Japanese equities, and we expect a similar pattern going forward given the proactive measures Japan has taken to mitigate potential risks. Meanwhile, ongoing policy uncertainty in the US may encourage global investors to rotate into non-US equities, including Japan.
Developments in the Middle East warrant ongoing monitoring. However, Japan holds substantial strategic oil reserves, providing a meaningful buffer against near‑term disruption. A sustained period of crude prices approaching 175 US dollars per barrel would likely be required to push the economy toward recession, and current price levels remain well below this threshold. Unlike in previous cycles, earnings growth from domestically oriented companies is now expected to play a meaningful role in driving overall equity market performance.
Yen strength may materialise as the Federal Reserve implements rate cuts, while tightening Fed policy could drive yen weakness due to widening interest-rate differentials. Currency movements create sector-specific
effects: a weaker yen benefits export-oriented industries while pressuring domestic businesses, with yen appreciation producing the reverse impact.
Japanese equities remain attractively valued relative to global peers and current interest-rate levels, offering room for modest multiple expansion alongside steady earnings. The market continues to offer significant
opportunities, with approximately 35% of TOPIX-listed stocks still valued below 1x price-to-book. The long-term investment case for Japan remains compelling: the country has evolved from its 1980 model – characterised by aggressive market share expansion, low margins and high capital expenditure – toward one centred on capital efficiency and return-focused management. In our view, Japanese corporates are now structurally stronger and more disciplined than in past decades.
