Indexy a trhy
Japan as an Investment: Lost Decades, a Comeback, and What to Expect Next
Key takeaways
- The Japanese market peaked in 1989, then lost over 80%, and only returned to its original levels in 2024 — the longest recovery in the history of major markets.
- The collapse was driven by the bursting of a real estate and equity bubble, structural economic problems, and two decades of deflation.
- Japan accounts for approximately 6% of MSCI World — the average passive investor therefore holds it automatically in a global portfolio.
- A weak yen reduces the returns on Japanese investments for euro or crown investors — currency risk in Japan is above average.
Japan is the story of the greatest equity bubble of modern times, thirty years of stagnation, and a recent return to the fore — and for a passive investor it is an automatic component of a global portfolio through MSCI World.
The bubble, the burst, and the lost decades
In 1989 the Japanese equity index Nikkei 225 was at its peak — approximately 38,900 points. Japan at the time owned part of New York's Rockefeller Center and Tokyo real estate was more expensive than all of California combined. Then the bubble burst.
The Nikkei fell approximately 80% and remained below its 1989 peak for fully 35 years. It only returned to its original highs in 2024. Two factors weighed it down the longest: structural deflation (prices were falling, so both companies and households were deferring spending) and demographic decline (an ageing and shrinking population).
What is behind the comeback
Since 2023 Japan has experienced a revival of investor interest for several reasons:
- End of deflation — inflation has returned, companies have begun raising wages
- Corporate reforms: companies are shedding excess cash, raising dividends and buybacks
- A weak yen attracts foreign tourists and benefits exporters
- Warren Buffett's investments in Japanese trading companies raised global investor interest
How to access Japanese equities as a Czech investor
Japan accounts for approximately 6% of MSCI World — anyone who holds a global ETF automatically holds Japanese companies. For deliberate exposure there are Irish UCITS ETFs on the Japanese market (most often tracking MSCI Japan or TOPIX). Consider the currency risk. This is not investment advice. For broader context, see MSCI World and emerging markets.
FAQ
Why did the Japanese market take so long to reach its highs again?
The collapse of the bubble in 1990 was exceptionally deep — the market fell 80%. Added to that were two decades of deflation, an ageing population, and a weak corporate culture of shareholder value creation. Recovery took 35 years.
Why is Japan attracting investors again?
The end of deflation, corporate reforms (buybacks, dividends), a weak yen that benefits exporters, and the interest of major investors like Warren Buffett. After decades, Japan again looks attractive from a valuation standpoint.
How does the yen exchange rate affect a Czech investor's return?
Significantly. Japanese equities are denominated in yen. A strong yen increases euro returns, a weak yen reduces them. In the years 2021–2024 the yen weakened significantly — this eroded the returns on Japanese investments for euro investors.
Do I need to buy a Japanese ETF separately?
Not necessarily. MSCI World includes Japan with a weight of around 6%. Anyone holding a global index automatically holds Japanese equities. A separate Japanese ETF only makes sense if you deliberately want to increase your Japanese exposure.