One of the largest and most developed economies in the world, Japan is known to have a well-educated, industrious workforce, while its large, affluent population makes it one of the largest consumer markets. With its phenomenal economic revival from the ashes of World War II, Japan was one of the first Asian countries to climb the value chain from cheap textiles to advanced manufacturing and services, which now account for the majority of the country’s GDP (gross domestic product) and employment, so much so, that from 1968 until 2010, the country’s economy was the second largest behind the U.S globally.
As the spread of COVID-19 has left its mark on most economies, Japan's sank 4.7% for the 2020 calendar year, the first year of contraction in 11 years, according to data from the Cabinet Office. Nonetheless, it managed to eke out growth in the last two quarters of 2020, slowly recovering from earlier pandemic damage. After a strong recovery at the end of last year, GDP is projected to expand by 2.6% in 2021 and 2% in 2022, supported by a strong recovery of the global economy, as well as government spending. Coupled with stronger external demand, all these factors are expected to boost exports and support stronger investment.
Against this backdrop, a handful of Japanese companies - global giants in their own right - have defied the pandemic’s effects, taking these challenges head on and adapting to an ever-shifting environment that has helped them to not only mark a recovery, but also maintain their clout. Below is an outlook of some of these top Japanese companies and their stock.
What is the main Japanese stock market called?
The largest stock exchange in Japan with 7,786 listings as of August 2021, the Tokyo Stock Exchange or TSE was established in 1878 and is headquartered in Tokyo. Run by the Japan Exchange Group, it is home to the largest and most popular Japanese heavyweights, like the likes of Mitsubishi (8306), SoftBank (9984), Honda (HMC) and others. It is divided into five sections, with the first two called the Main Market which include large cap and medium cap companies, whereas the other two sections are reserved for startup companies. The last section is for professional investors only. The TSE also offers specific trading information, real-time and historical index quotes, market statistics and information about and from specialists.
The Tokyo exchange trades between 9am and 3pm local time (00:00 GMT+1 till 06:00 GMT+1) with a lunch break between 11.30am and 12.30pm local time all days of the week, with the exception of Saturdays, Sundays and holidays declared by the exchange in advance.
Top Japanese stocks
Toyota Motor Corp (7203)
The carmaker giant that produces approximately 10 million vehicles every year boasts popular vehicle brands like Daihatsu, Hino, Lexus, Ranz and the namesake Toyota, the majority of which have become staples on the streets across the globe. But the conglomerate has also been lauded for being a leader in the development and sales of more fuel-efficient hybrid electric vehicles, starting with the introduction of the Toyota Prius back in 1997, while it now sells more than 40 hybrid car models around the world.
But as the semiconductor shortage rages on giving the car industry the jitters for what the future holds, how has Toyota been fairing? The company's net revenue contracted by almost 3% year-on-year, while it dipped to just under 28 trillion Japanese yen (approximately $247 billion) in the fiscal year ended March 2021. However, Toyota has largely been unfazed by the chip shortage, mainly due to the fact that it has been stockpiling semiconductors which are used in everything, from engine maintenance to car safety and entertainment systems. Meanwhile, in May 2021, it forecasted that profit is set to bounce back to pre-pandemic levels this year, while it announced a $2.3 billion share buyback and a one-to-five stock split, in addition to setting bigger targets for electric vehicles production.
The upbeat forecast for the full fiscal year comes on top of its March-quarter profit which almost doubled, with operating profit at 689.8 billion yen, beating an estimate of 641.5 billion yen from 10 analysts compiled by Refinitiv. Apart from reinforcing the company’s robust growth momentum, the upbeat forecast has helped set it apart from its rivals who have largely been battling billions of dollars of lost revenue as a result of the chip shortage.
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Honda Motor Co (HMC)
Recognised internationally for its wide variety of products that range from small, general-purpose engines to specialty sports cars which feature its efficient internal combustion engine technologies, Honda is a leading manufacturer of automobiles and the largest producer of motorcycles in the world. Yet, 2020 was tough on the automaker. At the height of the COVID-19 pandemic, Honda’s revenue fell by approximately 14.5% in the first three quarters of fiscal year 2021, however, things turned for the better when in Q3 2021 there was a hint of a recovery. Revenue grew to $36 billion, up 5.8%, while earnings per share also improved to $1.59 compared to $0.61 in the same period of the previous year.
Most of Honda’s automobile sales during fiscal year 2021 took place in Japan and other Asian countries, while the North American market accounted for about 32.5%. In contrast, the European market saw Honda sell 101,000 cars and despite the effects of the pandemic on the U.S. market, the automaker still managed to sell over 320,000 vehicles to U.S. consumers in the fourth quarter of 2020. And while Honda’s revenues are still in recovery, its stock has rallied 29% since the end of fiscal year 2020 which ended in March of 2020. Back then, commentators had declared that the stock may be close to its near-term potential, but the stock has grown even further, trading from $22 at the end of fiscal year 2020 to the current price of about $30.96 on September 10, 2021.
Forging ahead and tapping into the autonomous vehicle space, Honda announced that it will begin a testing programme for autonomous vehicles in September of this year, taking a step toward an autonomous vehicle mobility service (MaaS) business in Japan, which it will launch in collaboration with Cruise and General Motors (GM). In addition, the auto giant will reportedly share its new EV (electric vehicle) platform designs with General Motors, while it will start selling EVs in the U.S. made with over 50% of the same parts as General Motors cars. Although a surprising move, the two companies have agreed to develop two all-new EVs, while this is not the first partnership between the two. The firms have previously joined forces to produce an autonomous GM Cruise, as well as hydrogen fuel cells.
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SoftBank Group Corp (9984)
It is the company that famously made a $20 million investment in what was back then a small startup company based out of China by the name of Alibaba Group Holding. Out of that initial investment, SoftBank ended up making $60 billion by holding a 24.9% stake in Alibaba. The Forbes Global 2000 holding company and the second largest publicly traded business in Japan after Toyota, SoftBank operates in broadband, fixed-line telecommunications, eCommerce, information technology, finance, media and marketing, as well as other sectors, while it primarily invests in companies operating in technology, energy and the financial industries. In addition, it also runs the Vision Fund, the world’s largest technology-focused venture capital fund with over $100 billion in capital, backed by sovereign wealth funds from countries in the Middle East.
Over the past four years, SoftBank has poured around $84 billion into startups through the Vision Fund, which in turn has backed 224 tech firms in the same period, ranging from seemingly obscure businesses to well-established ones, such as Bytedance which owns TikTok, the popular video-sharing focused social networking service and DoorDash, the food ordering and delivery platform. So far, 2021 has been no different, with founder Masayoshi Son boasting of having backed 60 companies in just three months, while shelling out an average of $210 million a week between January and March of this year.
As for its financials, SoftBank’s revenue amounted to approximately 4.86 trillion yen in the fiscal year 2020, marking an increase of about 200 billion yen when compared to the previous year. But 2021 saw the company land the biggest profit in the history of a Japanese company, after it reported a record 4.03 trillion yen ($36.00 billion) Vision Fund unit profit from a fourth-quarter investment gain on Coupang. On the other hand, Group net profit was 4.99 trillion yen ($45.88 billion) in the year ended March, even topping the $42.5 billion made by Warren Buffett’s Berkshire Hathaway in its last business year.
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Sony Group Corporation (SONY)
A Fortune Global 500 company, Sony Group Corporation is listed on the Tokyo Stock Exchange in which it is a constituent of the Nikkei 225 and TOPIC Core30 indexes, while it has an additional listing on the New York Stock Exchange. In fact, it has been trading there since 1970, making it the oldest Japanese company to be listed in an American exchange. A major tech company that has been operating as one of the largest manufacturers of consumer and professional electronics products, such as televisions, cameras and video cameras and several audio products and smartphones, amongst other items, Sony is also a behemoth in the video game and video game console space, while it is one of the largest music companies and the third largest film studio.
In the period between April and June of 2021, which marks the first quarter of its 2021-2022 financial year, Sony Group sales topped 2.25 trillion yen ($20.5 billion), while net income grew from 194 billion yen to 212 billion yen ($1.93 billion) and earnings per share increased by 8.9% to 169.22 yen. Major segments such as those of music also saw soaring profits, from 35.6 billion yen ($325 million) to 55.4 billion yen ($506 million) on revenues that increased from 177 billion yen to 255 billion yen ($2.32 billion). On the other hand, the all-important games division enjoyed increases in sales of both hardware and peripheral devices.
Meanwhile, during a year of media consolidations and the rise of direct-to-consumer streaming operations by the Group’s competitors raised a number of questions over Sony’s strategy in the streaming sector. However, the company hit back and managed to gain ground in the so-called streaming wars thanks to licensing deals with both Netflix (NFLX) and Disney (DIS). As for its stock, its Tokyo-traded shares are up by 27% over the past 12 months.
As recently as September 1, American credit rating agency Fitch Ratings revised its outlook on the company to positive, affirming the long-term foreign and local-currency Issuer Default Ratings (IDR), as well as senior unsecured class rating at BBB+. According to the rating agency, Sony’s credit profile continues to improve on the back of expanding recurring revenue streams and better profitability particularly of its electronic product business.
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Nintendo Co Ltd (NTDOY)
Founded in 1889 as Nintendo Karuta, the company catapulted into the spotlight in 1981 with the release of Donkey Kong and the Nintendo Entertainment System, as well as Super Mario Bros in 1985. Since then, it has grown into a video game conglomerate, having produced some of the most successful consoles in the video game industry like the likes of Game Boy, Nintendo DS, Wii and the Nintendo Switch, while it has created blockbuster franchises including Mario, The Legend of Zelda, Splatoon and Xenoblade Chronicles amongst others.
Back in May 2021, the company released its financial results for the year ending March 31, reporting an 82% increase in operating profits year-on-year to $5.9 billion. Net sales were also strong at $16.1 billion, up 34% year-on-year on the $11.9 billion recorded the previous year. Nintendo also sold 28.8 million Switch units last year, up 37.1% when compared to the previous fiscal year, bringing the console’s lifetime sales to 84.59 million units.
Since its earnings report, the gaming giant’s stock has taken a beating, plunging to $59.12 on August 6 and dipping slightly further on August 27 as it was trading at $58.95. More recently, it has recovered slightly, currently trading at $62.86 on September 10, 2021. The company has been able to ride through the boom-and-bust game console cycle for almost four decades and there’s no reason to believe that it won’t carry on doing so. In fact, Nintendo has been making a number of investments to diversify outside of its dedicated gaming hardware business, partnering with Niantic, the Pokemon Go app developer, to create augmented reality (AR) titles, with a Pikmin themed app set to be launched this year, a partnership that is expected to breathe life into the company’s stalled mobile ambitions. At the same time, it has joined forced with Comcast’s Universal Studios to build four theme parks over the next few years, while a Super Mario movie produced by Illumination Studios, which has a track record of successful films like Despicable Me and The Secret Life of Pets, is in the works.
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Mitsubishi Ufj Financial Group Inc (8306)
Also known as MUFG for short, the company is a Japanese bank holding and financial services firm headquartered in Tokyo that forms part of the ‘Three Great Houses’ of the Mitsubishi Group alongside Mitsubishi Corporation and Mitsubishi Heavy Industries (7011).
Japan’s biggest bank, MUFG reported in August that it had managed to double its quarterly profit as credit costs dropped with profit coming in at 383.1 billion yen ($3.49 billion) for the three months to June 30, compared to the 183.5 billion yen reported a year earlier, which means that the bank retained its full-year profit forecast of 850 billion yen. In contrast, net interest income, which was mainly derived from its traditional lending business, came in at 496.9 billion yen for the quarter, marking a 5.9% on-year rise as corporate clients rushed to borrow to overcome the pandemic fallout.
These strong fundamentals are an important factor when considering that Japanese banks have been struggling with years of exceptionally low interest rates, together with a shrinking population. So the fact that MUFG, together with two other major lenders have collectively booked 1.1 trillion yen in credit-related costs which have since nearly doubled year-on-year amid the COVID-19 pandemic, is quite the impressive feat.
And there’s no stopping it. In August, the company teamed up with Coinbase, the largest U.S. cryptocurrency exchange to start a cryptocurrency exchange in Japan which will allow MUFG account holders to buy and sell virtual currencies, while it has also partnered with digital wealth management platform provider Quantifeed to launch a smartphone-based discretionary investment service known as Mirai Value, which matches novice investors to portfolios based on their risk profile.
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How to invest in Japanese stocks
Ready to invest in these top Japanese stocks? Your first step to tapping into a world of investment opportunities with Moneybase Invest is to sign up and open an account.
To do so:
- Download the app from either Google Play or the Apple App Store. Alternatively, you may access Moneybase Invest on your desktop by visiting https://live.cctrader.com/
- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. The stock has been added to your portfolio.
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