PSA Strategy: 2021 Japan Perspective
Japan goes into 2021 on something of a knife edge. The economy is (just) managing to stay out of trouble, the yen has not hit the important ¥100/US$ mark, and 10yr JGBs still offer a positive yield. The stock market is back up to levels last seen in August 1990, but there is a rising number of Covid cases in Japan. Stock selection would be unequivocally easier if we knew which way the Japanese economy was headed. Since we don’t, says Pelham Smithers, it makes sense to consider the structural angle, focusing on what are likely to be the big changes in 2021 after this extraordinary Year of Covid. We have identified three big changes. They involve overlapping topics which have as their nexus the story of the next-generation smart precinct / town / city, involving sustainability, and showcasing developments in automation and data usage.As we look ahead to 2021, Pelham Smithers sets out the arguments, lays bare the themes, and establishes our 2021 PSA Focus List choices. Finally, we introduce a group of stocks, perhaps too small for investment now, whose exciting businesses we are keen to bring to your attention as potential winners for the future.
Table of Contents
Overview 3
Background: 2020: Covid, Abe and DX 4
Japan’s Economy in 2021 6
Outlook for the Japanese Stock Market in 2021 12
Stock / Sector Strategy 14
Cost Controls 16
Improving Profits / Sales Mix 16
Data Plays 17
Ecosystems 18
Thematic Investing 20
5G – The Elephant in the Japan Tech Room 20
Japan’s Mobile Networks 23
Open vs Closed RAN / Non-Standalone vs Standalone 24
Private 5G Networks / Smart Developments 26
Government Pressure on Pricing 28
Revisiting the Smart Development Concept 29
Adding Hydrogen to the Mix 32
Toyota’s Woven City 34
The Rise of Lifestyle as a Service 35
Mobility as a Service – MaaS 35
Entertainment as a Service 36
Triangulation 36
NTT, Docomo and IOWN 37
Bundling One SoftBank, Unbundling Another 40
The Rise of “xxTech” 41
The Hardware Component of a Software Story 42
Combining Hardware & Software: Japan’s Ecosystem Companies 44
Extending the Ecosystem Concept to the Auto Industry 45
The BASE Ecosystem 46
Stocks for 2021 47
Conclusion 49
Appendix I: Performance of PSA Focus List 50
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.
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