Less painful than expected

Japan funds performed relatively well in the second and third quarters of 2002 but poorly in the final quarter.

Jonas Lindmark 13 January, 2003 | 4:03PM
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Overall the Tokyo stockmarket had an eventful 2002. Expectations were low at the start of the year since many investors feared a financial collapse when the fiscal year ended on March 31st. But the MSCI Japan index performed slightly better than the MSCI World index during the first quarter, probably as a result of government intervention to stem the fall in share prices.

Relief that the financial system did not collapse combined with strong economic growth in the first quarter enabled Tokyo to outperform global stockmarkets during the second quarter. The added boost of a relatively strong third quarter meant that the MSCI Japan was only down 12.3% in yen terms in the first nine months. This compared favourably with the fall of 29.1% for the MSCI World.


The fourth quarter was a substantial disappointment to investors in Japan funds. It became evident that economic growth was stalling once again and the political deadlock continued. While global stockmarkets staged a recovery, with the MSCI World rising by 5.6%, the MSCI Japan fell by 8.1%.

Still Japanese shares performed relatively well over the year with a fall of 19.4% compared with a global average drop of 25.2%. This strong relative performance, at a time when the Japanese economic recovery and the reform process both disappointed, illustrated the strength of pessimism at the start of 2002.


Economists generally agree that, even if the Japanese government implemented all the necessary reforms, it would still take over a year to feel any positive effects. Nevertheless history shows that increased optimism can be enough to lift the Tokyo market.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Jonas Lindmark

Jonas Lindmark  has been editor and head of fund analysis at Morningstar Sweden since August 2000. Before that he was personal finance editor and designed fund ratings during 9 years at the weekly business magazine Affärsvärlden.

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