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Japan Could Win A Medal In The Recovery Race

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Neuberger Berman


  • One recent effect of U.S. leadership in the current recovery has been the strength of the dollar.
  • Japan is currently enduring its fourth wave of coronavirus infections and has no domestic vaccine production.
  • Attitudes toward shareholder value among Japan's corporate management appear to be changing.

By Erik Knutzen

A strong manufacturing base and changing attitudes toward shareholder value could mean the world's capital heads to Japan, even if the world's sports fans cannot.

Since last summer, our Asset Allocation Committee has been shifting its views in favor of exposure to the economic recovery from the coronavirus crisis.

That has regional as well as asset-class and sectoral implications. In general, when risk appetite is high or a new business cycle is gathering steam, the Committee looks increasingly to markets outside the U.S. - the manufacturing centers of Europe and Asia and the commodity producers of the emerging world.

That is true of its latest views, even though, unlike a decade ago, this economic recovery is led by the U.S. rather than China.

The U.S. government's $1.9 trillion stimulus package will certainly boost domestic growth. At 916,000, Friday's non-farm payroll data beat estimates by almost 300,000 and was the highest reading in seven months. But when the OECD recently upgraded its global growth forecast for 2021 by 1.4 percentage points, to 5.6%, it noted that a full percentage point of that would come from the U.S. stimulus. One reason is likely to become clearer this week: checks going into the pockets of U.S. consumers are more likely to be spent on imported goods than on still-restricted domestic services.

But where exactly does the Committee think investors will get the most benefit? It has been overweight Japan in its asset allocation views since the middle of 2020, which has informed a key exposure to the TOPIX Index in our multi-asset portfolios. That is one of the important places where we think investors should be looking.

Dollar Exposure

One recent effect of U.S. leadership in the current recovery has been the strength of the dollar. A stronger dollar in 12 months' time

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Neuberger Berman profile picture
Neuberger Berman, founded in 1939, is a private, independent, employee-owned investment manager. The firm manages a range of strategies—including equity, fixed income, quantitative and multi-asset class, private equity and hedge funds—on behalf of institutions, advisors and individual investors globally. With offices in 23 countries, Neuberger Berman’s team is more than 2,100 professionals. For five consecutive years, the company has been named first or second in Pensions & Investments Best Places to Work in Money Management survey (among those with 1,000 employees or more). Tenured, stable and long-term in focus, the firm has built a diverse team of individuals united in their commitment to delivering compelling investment results for our clients over the long term. That commitment includes active consideration of environmental, social and governance factors. The firm manages $323 billion in client assets as of March 31, 2019. For more information, please visit our website at www.nb.com.For important disclosures: https://www.nb.com/disclosure-global-communications  Contact Us: Advisor Solutions (877) 628-2583 advisor@nb.com RIA & Family Office (888) 556-9030 riadesk@nb.com

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