Investment commentators have rightly developed an allergic reaction to any argument that is based around the notion that ‘this time it’s different.’ I sense a similar caution around the idea that Japanese equities are cheap, and that at long last – after decades of underperformance – Japan’s ‘time may have finally come.’

I’ve been burned at least twice in the last two decades by what, in asset allocation, looks like the classic value trap: ie, Japanese equities always look dirt cheap compared with US equities. The iron law of all value investing is that something can stay cheap for much longer than we all expect if there is no catalyst for an upwards revaluation. Thus, Japanese equities have been and continue to be cheap, and yet no one seems to care.

Here are some useful metrics courtesy of quant analysts at Societe Generale. At an aggregate national level, the mean price-to-earnings ratio of Japanese stocks is currently running at just 22 for historic 2020 numbers, falling to 16.4 in 2021 (based on estimates) and 15 for 2022 (also forecasts); by comparison, let’s just say that US equities are rather more expensive! The dividend yield is also more favorable at 2.1% to 2.3% depending on the year, and the price-to-book value is between 1.3 and 1.4.