Commsec bullish on Japan

Increasing domestic consumption, company profits and export demand from China and the United States are expected to fuel an already burgeoning Japanese economy according to direct investment provider Commsec.

And in an attempt to tap such favourable economic conditions, the Commonwealth Bank owned trading facility has launched a new Nikkei 225 index tracking managed fund.

The five year fund, which charges a flat 2 per cent fee, requires a minimum investment of $10,000 and guarantees a return of 7 per cent in the first year and 2 per cent for the remaining four.

Adding to similar Commsec products already on offer for the Australian, Indian and Chinese markets, the Japanese fund is not available on any platforms including Colonial First State’s First Choice.

According to Commsec chief equities analyst Craig James, the Japanese economy grew at a rate of 2.4 per cent in 2005 and is expected to grow solidly at 2 per cent annually to 2008.

James said the Japanese economy went through a period of prolonged adjustment triggered by a decline in its property market and world stock market crash in the late 1980s.

While Australia was able to recover from the share market losses of the late 1980s by 1992 by “taking it on the chin” through increased interest rates, James said Japanese banks “remained saddled with bad debt”.

But he said things started to turn around for Japan in 2003.

“Banks are lending again so consumers and companies are more confident, so we’re seeing the motors running and that momentum is a powerful force in any economy,” he said.

Price earnings ratios in Japan are currently at around 20, which James said are low by Japanese standards.

The Japanese market grew 40 per cent in 2005, making it the best performing major share market in the world.