James Clavell’s 1975 novel Shogun was first made into a TV series in 1980. The story is loosely based on the adventures of English navigator William Adams, who journeyed to Japan in 1600 and rose to a high rank in the service of the Shogun Tokugawa Ieyasu. The history of some of the actual characters in the novel has been preserved in Nagasaki as tourist attractions. Unfortunately, better known as where the second American atomic bomb was dropped, Nagasaki was the one port open to foreigners in Japan to dock and trade then, where Adams lived out his life till 1620. Curiously, it was Adams who also influenced Japan’s isolationist policy, and ironically, the third Tokugawa Shogun, Iemitsu, in enforcing the Sakoku Edict to eliminate foreign influence in 1635, expelling Adams’s two children of mixed race to the Dutch colony of Batavia, or Jakarta today.
The 1980 miniseries won the Primetime Emmy Award for Outstanding Mini Series. Forty-four years later, this year’s remake became the first Japanese language series to win an Emmy for Outstanding Drama Series. It was only the second non-English language series nominated for this award. The other was Squid Game in 2022. For this, my Japanese friends claim they are still ahead of South Korea, even though few will imagine that it was NTT DoCoMo, the creator of the i-mode mobile internet platform in 1999, which was left behind by Korea’s Samsung Electronics, the current Asian smartphone champion competing against America’s Apple iPhones.
This is one of many ironies that come to mind as I make yet another trip to Japan to see if my January 2023 “Dark Horse” call to go long on Japan is still on the run. It was, after all, Commodore Matthew Perry of the US Navy who, in July 1853, led a fleet of warships fleet to steam past Edo, as Tokyo was known then, and fired blank shots from his canons in an unbridled demonstration of intimidation. With the then-shogun Tokugawa Ieyoshi incapacitated, Japan’s 220-year-old isolationist policy ended and opened ports other than Nagasaki to American trade.
Contrast that with America’s isolationist instincts and protectionist industrial policies today, whether Republican or Democrat. For those with nativist thoughts, the Emmy and World Series Baseball won by Shogun and the LA Dodgers — anchored by Japanese darling Shohei Ohtani — respectively, is proof that the “radical left”, as Donald Trump calls Californian Democrats, have sold out the country to immigrants and deficits, according to The Washington Post.
All bets are over
Followers of this column may know that I was in Japan over the final leg of the spectacle, otherwise known as the US Election. Staying in an uncomfortable holding pattern for the last month, with more cash than usual in my investment portfolio, I anticipated some volatility pre- and post-Nov 5. Indeed, as the electoral polls shifted towards Trump in the lead-up, the rest of the world equity markets, excluding the US, eased off the pedal, and the US dollar (USD) rallied as the inflation trade saw both interest rates rise and crypto rally alongside.
Given Elon Musk’s daily million-dollar giveaway in swing states for Trump, the Tesla stock proxy we alluded to for a Trump win saw a nice jump. However, signs turned more “blue” with Kamala catching up since the Puerto Rican “garbage” comments at Trump’s big show in New York. Indications that the Latino vote shift may make a difference in Michigan, Pennsylvania and Nevada have thus seen Tesla pull back a tad.
At the point of writing before Nov 5, online prediction (betting) markets, including PredictIt, have given Harris an edge for the first time in a month since Oct 9. Other sites like Polymarket and Kalshi, too, have narrowed considerably. Bitcoin also surrendered the US$70,000 ($92,396) level, which had risen well above by early November. Polling models show Harris winning 49/100 simulations and Trump at 50. However, The Economist has Harris in the final weekend with a 52–48 lead. Perhaps The Economist is talking up its own book, a rare move for this UK-based publication. It waded into US politics with a big call against a Trump Presidency in its latest issue just ahead of election week. In contrast, Washington Post’s owner, Amazon’s Jeff Bezos, kept the storied DC-based media institution from declaring for Harris, even if he could not control a bunch of offended subscribers cancelling and journalists quitting immediately after.
We may find out whether prediction markets of polls will prevail by the time this column is published for print on Nov 6. Or not, if recounts in swing states drag it out, or if Harris wins by the skin of the electoral college teeth, it will likely go to the courts with Republicans well prepared.
However, I hope to be well-positioned with some cash to deploy if there is a mess. I also hope for a soft US landing in 2025, irrespective of who is in the White House, and benefit from the next hopeful revaluation of REITs, as interest rates will have to ease.
Back to basics
The US economy is slowing down, as evidenced by last week’s jobs report, which severely underwhelmed forecasts with 12,000 jobs instead of 200,000 created last month and revisions down from previous months. President Biden attributes this to the recent hurricanes, which may have impacted the labour market negatively but should only have been in selected areas. Suppose Trump wrecks the economy with tariffs, choking imports and creating domestic wage push inflation. In that case, it will likely be stagflationary, which should ultimately bring the USD down in terms of time and rates.
Strong domestic-focused businesses in large economies may be better bets in this environment than globalised companies dependent on trade like Samsung, which dominates the Kospi index (hence Chew On This 1161 was lukewarm to it). Even though Nvidia (which SoftBank’s Masayoshi Son just claimed is undervalued and will be worth 10 times more) has replaced fallen tech angel Intel Corp on the Dow Jones Index, we might indeed be on the verge of (another hyperbolic Son call) Super AI Boom; I still prefer assets that are backed by secular themes like data centres and logistics. In any gold rush, the folks who sell the pick axes are guaranteed to make money.
In the last week in Singapore, two boring stocks Chew On This covered in 2023 that were trading well within their net asset value found new life. Hongkong Land Holding’s strategic pivot from development into asset management — sounds like a leaf from CapitaLand and Keppel’s playbook. As cap rates improve with forward rates more favourable, a long-awaited REIT from the Jardine subsidiary or two may be on the cards. At a 60% discount to net asset value (NAV), its stock price has rightly started a re-rating. Similarly, as beauty appears to be in the eye of a Saudi Arabian beholder who has made a non-binding offer for some of Olam Group VC2 ’s businesses, the sum of its parts should also be worth more than the market price today if the value is realised through a sale or an overdue separate listing. It, too, popped more than 10% on the announcement.
Minority rule
Perhaps we may take the lead from Japan. Just before I arrived, the ruling Liberal Democratic Party (LDP) lost a snap election of its calling. This made my trip a little cheaper as the yen fell back from 110 to 115.5 for each Singdollar since my last trip a month ago. As the Bank of Japan (again) threatened to intervene, including raising interest rates, the Nikkei 225 largely held its own without too much of a wobble, still steady above 38,000 points.
It appears business and life marches to its own beat from the many conversations I had on the ground in Tokyo and observations of the multiple new office building construction sites around Nihonbashi and Manouchi. Our airport pick-up was another Chinese national staying in Japan to work after studying. According to him, the economy could be better but was moving at a steady clip way above China with both domestic confidence and foreign interest — in real estate, for example. Tourism and hospitality are doing very well thanks to the cheap yen, and we even have Singapore funds developing ski resorts in Nagano.
My former colleague who used to run our Japan office explained that the LDP was expected to lose anyway, but the fragmented opposition could not form a government. So, the result was as underwhelming as the lack of public interest and participation. Indeed, his daughter encapsulated the younger folks, who had no interest in politics, did not vote and were not troubled about an LDP minority government being in charge. Her father mused that this could force a change in the politics and policies of a gerontocracy.
Irrespective, nominal inflation in prices and wages is forcing adjustments, including retirement savings and younger professionals alike, to deploy into investments, benefitting the stock market. I hear of both old securities companies that are finally profitable, either looking to sell at a premium (unheard of for decades) or looking to invest out from Japan into Southeast Asia. And while we know that it takes ages for big businesses to move in Japan, it was heartening to hear of an impending potential data centre REIT listing in Singapore next year — a fruit of labour from an initial pitch made seven to eight years ago.
The Tokyo Stock Exchange’s push for Japanese-listed companies to create value and governance reform matched with domestic, and since 2023, foreign capital appears to have more room to run. Japan’s increasing openness to foreign capital, labour and trade is giving a new spring in its steps. It has a large enough domestic market to support its industrial companies who suffer from Galápagos syndrome — many goods it develops and sells go no further. As the Chinese economy stabilises, Japan’s once booming export market may be revived as it makes inroads into India and Southeast Asia.
With all the positives, I expect the yen to rally in 2025 as the USD falls, lending strength to equity market returns. Should any financial or geopolitical volatility from the many bonfires that could arise from the new shogun in the White House or the Middle East and Ukraine, the yen will strengthen, and carry trades will unwind.
I return from Hakuba comfortable with my small allocation to Japan via the SGX-listed Lion-Nomura Japan Active ETF — open enough for growth but big enough, as it is the 4th largest economy globally, to be an island unto its own if all else fails.
Chew Sutat retired from Singapore Exchange S68 after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore
