In this piece, we will take a look at ten best Japanese stocks to buy now.
As we navigate through 2024, Japan’s economic landscape is emerging as a compelling arena for investors. Despite facing a rough start to the year, the nation is showing signs of a promising rebound. This economic shift, marked by a blend of renewed consumer confidence and a supportive policy environment, is setting the stage for a vibrant stock market. As we delve into our list of the ten best Japanese stocks to buy now, understanding Japan’s evolving economic narrative becomes crucial for making informed investment decisions.
Japan’s economic landscape has undergone a notable transformation, offering a promising horizon for investors. Despite facing challenges in early 2024, signs of a recovery are beginning to emerge. The initial months of the year saw Japan grappling with a slight contraction, with real GDP declining by 0.5% in the first quarter and trailing by 1.3% from its previous peak. Consumer spending, a critical driver of economic activity, fell in three out of the last four quarters, compounded by reductions in residential and non residential investments and exports. However, this downturn seems to be approaching its nadir.
Looking ahead, the latter half of 2024 holds potential for a turnaround. According to Deloitte’s Global Economics Research Center, stronger wage growth and moderate inflation are expected to stimulate consumer spending. Furthermore, a weaker yen is anticipated to bolster export growth. While these factors are poised to enhance economic conditions, growth might remain modest as the central bank is likely to tighten monetary policy, tempering some of the anticipated upswing.
Consumer sentiment shows signs of improvement, albeit gradually. Real household spending, though down 1.8% in May compared to the previous year, marks a significant recovery from the 6.3% decline observed in January. Retail sales growth has accelerated, although broader measures like the real consumer activity index are yet to display a robust recovery. Despite these mixed signals, underlying consumer fundamentals are improving, suggesting a rebound in spending is on the horizon.
A significant factor in this potential rebound is the labor market. As reported by Morgan Stanley, Japan is experiencing its strongest wage growth in three decades, with scheduled earnings up 4.7% year over year in May. This wage increase, coupled with moderate inflation of 2.8%, enhances household purchasing power. Low unemployment rates and rising total employment further contribute to a more favorable economic environment.
Nevertheless, rising food and energy prices present challenges. Costs for fuel, light, and water increased by 6.6% year over year in May, reversing previous declines. Food prices also saw a notable rise of 4.1% from the previous year. These increases are partly due to a weakening yen, which has caused import prices to surge. The yen briefly hit its weakest level since 1986 in June, prompting speculation about potential government intervention to stabilize the currency. Despite these challenges, the yen’s depreciation has also led to increased foreign demand for Japanese goods and services.
The weaker yen has, paradoxically, fueled a rise in exports, with goods exports up 11.9% year over year in May. The global demand for Japanese technology, including integrated circuits, has driven this growth. Moreover, foreign tourism, despite being below pre-pandemic levels from China, has reached record highs and contributed positively to employment in related sectors.
The bank’s research highlights a significant shift in Japan’s economic trajectory. The end of deflation and a return to steady growth are driving a generational change in Japan’s economy. With nominal GDP growth surpassing 3% in recent years and improvements in corporate governance, Japan is positioned as an attractive market for global investors. The combination of policy reforms and economic adjustments is expected to continue benefiting Japanese equities, particularly in technology and banking sectors.
As we delve into the ten best Japanese stocks to buy now, it’s essential to recognize these evolving economic conditions. Japan’s stock market, buoyed by renewed economic dynamism and corporate reforms, presents promising opportunities for investors. The backdrop of stronger wage growth, modest inflation, and an improved economic outlook sets the stage for top performing stocks in the Japanese market.
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Our Methodology
For this article, we first identified 20 large Japanese stocks by using stock screeners and financial media. We then selected the 10 stocks that were the most popular among hedge funds, as of Q2 2024. The list is arranged in ascending order of the number of hedge fund holders with long positions in each company.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. HeartCore Enterprises, Inc. (NASDAQ:HTCR)
Number of Hedge Fund Holders: 2
HeartCore Enterprises, Inc. (NASDAQ:HTCR), a Tokyo-based enterprise software and consulting firm, is a top contender in the list of the best Japanese stocks to buy now. The company’s extensive expertise in SaaS solutions and data analytics, combined with its innovative customer experience management platform, makes it a leader in its sector. Additionally, HeartCore Enterprises, Inc. (NASDAQ:HTCR) GO IPO consulting services help Japanese companies list on U.S. exchanges, providing another key revenue stream.
In the second quarter of 2024, HeartCore Enterprises, Inc. (NASDAQ:HTCR) continued to grow its core business, highlighted by a 20% organic growth in its software division. The company formed key partnerships, including collaborations with Hitachi Systems, Ltd., and INCUDATA Corp., which will strengthen its offerings in customer retention and digital marketing strategies. HeartCore also launched its Artificial Intelligence Software Development Division, setting the stage for future technological advancements in AI and content marketing solutions.
From a financial standpoint, HeartCore Enterprises, Inc. (NASDAQ:HTCR) quarterly revenue was $4.1 million, a decline from the previous year’s $5.1 million. The drop was largely attributed to the depreciation of the yen and reduced maintenance service revenue. However, the company’s strong cash position, with $3.8 million in cash reserves, showcases its financial resilience. Operating expenses also decreased to $2.3 million, a notable improvement over the previous year’s $3.0 million, thanks to lower selling and administrative costs.
Despite a net loss of $2.2 million in Q2, HeartCore Enterprises, Inc. (NASDAQ:HTCR) long-term outlook remains bullish due to the expansion of its Go IPO business. This division is expected to contribute significantly to the company’s performance in the second half of 2024, as several IPO clients are slated to go public by year-end. With a 30% organic growth forecast for 2024, bolstered by robust partnerships and a promising IPO pipeline, HeartCore Enterprises, Inc. (NASDAQ:HTCR) is positioned for a strong recovery and growth trajectory moving forward.
09. ORIX Corporation (NYSE:IX)
Number of Hedge Fund Holders: 5
ORIX Corporation (NYSE:IX), a major Japanese multinational financial services company, is included among the best Japanese stocks to buy now due to its strong performance and diversified business operations. Headquartered in Tokyo, ORIX Corporation (NYSE:IX) operates in various sectors, including finance, leasing, real estate, and investment. Its consistent growth and global presence make it a top contender in the Japanese stock market.
In its Q1 2025 earnings report, ORIX posted a 38% year-over-year increase in net income, reaching JPY86.7 billion. This strong performance brought the company’s annualized return on equity (ROE) to 8.7%, demonstrating its ability to generate solid returns for shareholders. Notably, ORIX Corporation (NYSE:IX) achieved 22% of its full-year net income target of JPY390 billion in the first quarter alone, positioning it well to meet its financial goals for the year.
ORIX Corporation (NYSE:IX) diversified business model is a key driver of its growth. Its finance segment saw stable earnings, contributing JPY47.2 billion in profits, despite a slight year-over-year decline of 1%. This was primarily supported by strong investment income in the life insurance business. The company’s operational segment, which includes airport concessions and real estate, experienced a 14% increase in profits, generating JPY53.2 billion. ORIX’s airport concessions, including Kansai International Airport, benefited from a rise in inbound tourism, with profits from tourism-related businesses increasing by 78%.
Additionally, ORIX Corporation (NYSE:IX) capital recycling strategy, which involves selling investment properties and exiting private equity investments, generated JPY35 billion in capital gains during the quarter. The company continues to make strategic investments, which are expected to fuel future growth and contribute to its robust financial performance.
ORIX Corporation (NYSE:IX) strong fundamentals are further evidenced by its ability to navigate market challenges and capitalize on growth opportunities. With a healthy balance sheet and solid cash flow, ORIX Corporation (NYSE:IX) is well positioned for long-term success. Its diversified revenue streams, strong ROE, and consistent earnings growth make it a compelling investment in the Japanese market.
