Japan Funds: A Difficult Road Ahead?

Rising input prices and a slowing US economy gives Japan managers a difficult task. But are they up to it?

Christopher J. Traulsen, CFA 26 March, 2008 | 11:26AM
The Japanese economy is caught between Scylla and Charybdis. On the one side, the weakening US dollar has ignited fears of a slowdown as it makes Japanese goods significantly more expensive to buyers in a key export market. Weakening fundamental indicators such as a sharp drop in capital spending during the fourth quarter of 2007 have added to concerns. On the other, prices of raw materials that Japan needs to produce goods for domestic and export consumption have risen sharply.

The past year has seen all comers in the sector get tarred pretty heavily. But the one lesson we keep taking away from this group is that it's hard to justify paying up for active management. In a down market, where you'd expect the ability of active managers to play defence to add some value, few covered them

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About Author

Christopher J. Traulsen, CFA

Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.

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