Report

PSA Market Strategy: How Japan Transformed from a Bear Market to a Bull Market (and is There More to Come?)

In our 2010 Japan Perspective, written close to the nadir of the bear market, we discussed what was wrong with Japan, but also what it was starting to do right. Fourteen years on, the Nikkei 225 - though not yet Topix - has hit a new all-time high. This report looks at how Japan built on those things that were going right, while also starting to address what else needed to be done, and looks at whether more is needed to be done if the market rally is to continue from here.
Underlyings
10x Genomics Inc Class A

APPLE INC - APPL - US

Broadcom Inc.

Broadcom, via its subsidiaries, is a designer, developer and supplier of a range of semiconductor and infrastructure software solutions. The company develops semiconductor devices with a focus on digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. The company provides products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, and factory automation. The company has three segments: semiconductor solutions, infrastructure software and intellectual property licensing.

Eli Lilly and Company

Eli Lilly and Company discovers, develops, manufactures, and markets products in a single business segment: human pharmaceutical products. The company's human pharmaceutical products include: diabetes and other endocrinology products, immunology products, neuroscience products, oncology products, and other products. The company's diabetes and other endocrinology products include: Baqsimi? and Basaglar?. The company's immunology products include: Olumiant? and Taltz?. The company's neuroscience products include: Cymbalta? and Emgality?. The company's oncology products include: Alimta?, Cyramza?, Erbitux? and Verzenio?. The company's other products include: Cialis?.

Exxon Mobil Corporation

Exxon Mobil operates or markets products in United States and other countries through its divisions and affiliated companies. The company's business involves exploration for, and production of, crude oil and natural gas and manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and other products. In United States, the company's development activities are focused on the onshore United States, in the Permian Basin of West Texas and New Mexico and the Bakken oil play in North Dakota. Gas development activities are also focused on the Marcellus Shale of Pennsylvania and West Virginia, the Utica Shale of Ohio and the Haynesville Shale of East Texas and Louisiana.

Facebook Inc. Class A

Facebook is building and engaging products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and in-home devices. The company's products include: Facebook, which enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers; Instagram, which is a place where people can express themselves through photos, videos, and private messaging, and explore their interests in businesses, creators and communities; Messenger and WhatsApp, which are messaging applications; and Oculus, which connects people through its Oculus virtual reality products.

Fanuc Corporation

Fanuc is engaged in the development, manufacture and sale of CNC systems as well as application products based on its engineering. Co.'s principal products include Factory Automation (FA) products such as computer numeric control (CNC) systems and laser products; The Robot including collaborative robot, arc welding robot, palletizing robot, mini/small/medium/large size robot and paint robot; and the he Robo-machine such as robodrill(compact machining center), roboshot (electric injection molding machine), robocut (wire-cut electric discharge machine) and robonano (ultra precision machine).

Itochu Corporation

Itochu is a trading company. Textile segment offers fibers, raw materials, textile fabrics, textile materials and apparel. Machinery segment offers plant projects, vessels, aircraft, automobiles, construction machinery, industrial machinery, among others. Metals segment distributes steel products and nonferrous products. Energy and Chemicals segment offers crude oil, petroleum products, LPG, LNG, chemicals, pharmaceuticals, synthetic resins, among others. Food segment trades and distributes foodstuffs. General products and realty segment provides pulp, lumber, and develops properties. ICT and Financial segment is engaged in the provison of IT, retail finance and insurance services.

KDDI Corporation

KDDI is a telecommunications company. Along with its affiliates, Co. operates in four principal business segments: personal, value, business, and global. Co. is engaged in the sale of mobile handset; and the provision of mobile telecommunication services under "au" brand name, Internet contents, settlement service, and electronic money service for individual customers. Co. offers information and communication technology ("ICT") solution services and data center services for domestic corporate customers, overseas companies and individual customers. Co. is also involved in the call center business, the research and technological development, and the telecommunication facilities maintenance.

Kyocera Corporation

Kyocera is engaged in fine ceramic components, electronics devices, equipment, services and networks. As of Mar 31 2018, Co. has 230 subsidiaries and 4 affiliates outside Japan and 23 subsidiaries and 7 affiliates in Japan. Co.'s customers include individuals, corporations, governments and governmental agencies. Co. categorizes its operations into seven reporting segments: Fine Ceramic Parts Group, Semiconductor Parts Group, Applied Ceramic Products Group, Electronic Device Group, Telecommunications Equipment Group, Information Equipment Group, and Others.

Microsoft Corporation

Microsoft is a technology company. The company develops and supports software, services, devices, and solutions. The company provides an array of services, including cloud-based solutions as well as solution support and consulting services. The company also delivers relevant online advertising. The company's products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; and video games. The company also designs, manufactures, and sells devices, including personal computers, tablets, gaming and entertainment consoles, other devices, and related accessories.

Mitsui & Co. Ltd

Mitsui & Co. is a general trading company engaged in a range of global business activities including worldwide trading of various commodities, arranging financing for customers and suppliers in connection with Co.'s trading activities, organizing and coordinating industrial projects, participating in financing and investing arrangements, assisting in the procurement of raw materials and equipment, providing new technologies and processes for manufacturing, and coordinating transportation and marketing of finished goods. Americas, Europe, the Middle East and Africa, and Asia Pacific trade in various commodities and conduct related business led by overseas trading subsidiaries in each region.

Mitsui Chemicals Inc.

Mitsui Chemical is the parent company of a group engaged in the manufacture and sale of petrochemicals, basic chemicals, urethane, functional polymeric materials, functional chemicals and engineered materials. Co.'s principal products include optical lens materials, medical materials, catalysts, chemical products, agricultural products such as agricultural insecticide, fungicide, soil fumigation disinfectant, ant-repellent and disease prevention agents for use in living environments, as well as petrochemical raw materials, phenols, synthetic fiber raw materials, PET resin, industrial chemicals, polyethylene and polypropylene.

NEC Corp.

NEC is the parent company of a group engaged in the manufacture and sale of computers, software, communications equipment, and electric devices. Co. operates in four business segments: public, enterprise, telecom carrier, and system platform. Co. supplies integration, maintenance and support, and outsourcing services and system equipment for government, public and enterprises; network infrastructure to telecom carriers; hardware such as servers and mainframes, software, enterprise networks solutions. In addition, Co. also provides smart energy such as electrodes and energy storage systems, as well as smartphones, mobile phones, "BIGLOBE" Internet services and lighting equipment.

NIPPON STEEL CORP.

Nippon Steel & Sumitomo Metal and its affiliates are mainly engaged in the manufacture and sale of steel products, chemicals and nonferrous metals. Co. is also involved in the engineering and construction works; the manufacture and sale of semiconductor components and materials, electronic components and materials, metal-processed products, and ceramic components and materials; the manufacture and sale of chemicals products, coke and coal tar chemicals products and electronic materials; and the provision of engineering and consulting services pertaining to computer systems.

Nippon Steel Trading Corp

NVIDIA Corporation

NVIDIA engages in graphics processing unit (GPU)-based visual computing and accelerated computing platforms. The company has two segments, GPU and Tegra Processor, which are based on a single underlying architecture. The company's GPU product brands are aimed at markets including GeForce for gamers; Quadro for designers; Tesla and DGX for artificial intelligence data scientists and big data researchers; and GRID for cloud-based visual computing users. The company's Tegra brand integrates an entire computer onto a single chip, and incorporates GPUs and multi-core CPUs to drive supercomputing for autonomous robots, drones, and cars, as well as for game consoles and mobile gaming and entertainment devices.

Oracle Corporation

Oracle provides products and services that address enterprise information technology (IT) environments. The company's products and services include applications and infrastructure offerings. The company's cloud and license business engages in the sale, marketing and delivery of its applications and infrastructure technologies through cloud and on-premise deployment models including its cloud services and license support offerings; and its cloud license and on-premise license offerings. The company's hardware business provides Oracle Engineered Systems, servers, storage, industry-specific hardware, operating systems, virtualization, management and other hardware-related software to support diverse IT environments.

Panasonic Corporation

Panasonic offers a range of products, systems and components for consumer, business and industrial use based on electronics and precision technology, expanding to building materials and equipment, and housing business. Co. divides its businesses into five segments: Appliances, Eco Solutions, Connected Solutions, Automotive & Industrial Systems and Other. Co.'s principal products include home appliances such as refrigerators, room air conditioners, washing machines and vacuum cleaners; lighting fixtures and electric lamps, video and audio equipment, electrical components, batteries, semiconductors and optical devices.

Renesas Electronics Corporation

Renesas Electronics is a semiconductor solution provider. Co.'s solutions include electronic products and systems for communications, computing and peripherals, consumer electronics, as well as automotive and industrial sectors. Along with its subsidiaries and associated company, Co. operates in four business segments: automotive, industrial, broad-based and other semiconductors. Co.'s principal products are microcontrollers, microprocessors, smart analogs, secure MCUs (Microcontroller Units), embedded systems platform, software, tools, IPDs (Intelligent Power Devices), power MOSFET (Metal-Oxide-Semiconductor Field-Effect Transistors), analog and mixed-signal ICs, and transistors.

Shin-Etsu Chemical Co Ltd

Shin-Etsu Chemical is mainly engaged in the manufacturing and sales of polyvinyl chloride and organic chemicals, silicon, functional chemicals, semiconductor silicon, electronic and functional materials, and others. Co.'s principal products include polyvinyl chloride, caustic soda products, methanol, chloromethane, silicon products, cellulose derivatives, silicon metal, poval (polyvinyl alcohol), synthetic pheromones, semiconductor silicon products, rare earth magnets, encapsulation materials, photoresists, photomask blanks, synthetic quartz products, epoxy molding compounds, pellicles, and resin processed products. Co. is also engaged in the export of plant equipment and others.

SUBARU CORP

SUBARU and its affiliates are mainly engaged in the manufacture and sale of automobiles and aerospace-related equipment. The Automobiles segment is engaged in the manufacture, sale and repair of passenger cars and their components under the name of "SUBARU." The Aerospace segment is engaged in the manufacture, sale and repair of commercial and defense aircrafts, helicopters, unmanned aerial vehicles and their components. In addition, Co. is engaged in the manufacture, sale and repair of generators, engine-equipped machinery, agricultural machinery, construction machinery and their components; the leasing of real estate; and the manufacture and sale of temporary houses.

Tokyo Electron Ltd.

Tokyo Electron is a supplier of semiconductor production equipment ("SPE") and flat panel display ("FPD") selling through global network that spans Japan, the U.S., Europe and Asia. Co.'s principal products are coater/developers, plasma etch systems, thermal processing systems, single wafer deposition systems, cleaning systems (auto wet station, single wafer cleaning system, pre-clean system and scrubber system), wafer prober, FPD coater/developers and FPD plasma etch/ash systems. In addition, Co., through its subsidiaries, is engaged in the provision of transportation services, insurance services, as well as the support services for Co.'s photovoltaic cell ("PV") production equipment.

Toyota Industries Corp.

Toyota Industries is mainly engaged in the manufacture and sale of automobiles, industrial vehicles and textile machinery, as well as logistics business. Co. operates in three business segments: automobile, industrial vehicle and textile machinery. The Automobile segment manufactures and sells automobiles, engines and compressors for automotive air-conditioners, foundry pieces and electronic equipment. The Industrial Vehicle segment provides forklift trucks, warehouse equipment, automatic warehouse, vehicles for high-place work. The Textile Machinery segment offers weaving machines and spinning machines, as well as yarn quality measurement equipment and cotton grading equipment.

Toyota Motor Corp.

Toyota Motor is an automobile manufacturer. Co. is primarily engaged in the design, manufacture, and sale of sedans, minivans, compact cars, sport-utility vehicles, trucks and related parts and accessories throughout the world. Co. provides financing, vehicle and equipment leasing and certain other financial services primarily to its dealers and their customers to support the sales of vehicles and other products manufactured by Co. Co.'s principal business segments are automotive operations, financial services operations and other operations. Co. sells its vehicles in approximately 190 countries and regions, and markets for its automobiles in Japan, North America, Europe and Asia.

Provider
Pelham Smithers Associates Ltd
Pelham Smithers Associates Ltd

Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods. 

PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries. 

The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012. 

Analysts
Pelham Smithers

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