Dudley added that she believes the appetite is there and some changes are already happening, but she expects it to take longer for these to become embedded.
“Japan is a pretty conservative society and I believe companies have wanted to make reforms but needed the support to push them into it. I think it will be really interesting to see whether small and mid-caps follow the lead of the large companies and go beyond the minimum ‘comply or explain’ level requirement to make real changes,” she noted.
Both Dudley and Bauernfreund acknowledge the aging, declining population of Japan is a real concern in the long run, but noted that in the nearer term this could well be offset by increased workforce participation by women, something which remains much lower than in the West.
Also on the macro side there are dangers such as continued fall-out emanating from China or geopolitical instability in the region potentially pulling the rug from under any reforms agenda to watch for.
The next few years look set to be a defining period for Japanese equities as the country plays its trump card in terms of the prospects for its major companies.
