Compelling Valuations in Japan

Japanese equities are currently trading at compelling valuation levels compared to other developed equity markets around the world and relative to their own historical averages. We believe the Japanese market deserves a closer look.

December 2023
  • Masakazu Takeda
    Masakazu Takeda, CFA, CMA
    Portfolio Manager
  • Tadahiro Fujimura
    Tadahiro Fujimura, CFA, CMA
    Portfolio Manager

1. Attractive Price-to-Earnings Multiple

The price-to-earnings multiple, or P/E ratio, is the most common measure used to value equities. Japanese large-cap equities, as represented by the Tokyo Price Index (TOPIX), are currently trading on a P/E multiple of 14.3x 2023 forward earnings, 27% lower than the U.S.

2. Low Price-to-Book

On a price-to-book basis (P/B), Japanese equities are also offering investors great value compared with other global developed equity markets. TOPIX is trading at just 1.3x book value, about a third lower than the average among the top developed equity markets and more than two-thirds lower than the U.S.

3. Japan Small-Caps at a Discount

Small-cap Japanese companies are also trading at a discount to international peers. Small-cap stocks in Japan are trading on just 15.3x 2023 forward earnings, and as a point of reference, a 32% discount to U.S. small caps trading at 21.9x.

4. Japan’s Attractive P/E Relative to History

Japan’s current 2023 forward P/E multiple is about the same as its 10-year average of 14.1x.


We believe Japan’s growth story is just starting to unfold. Following the advent of Abenomics, many Japanese companies are experiencing higher profitability due to corporate restructuring, better governance, and a more competitive currency. With Japanese equities currently offering attractive valuations compared to G7 developed country equity markets and relative to history, we believe Japan deserves a closer look as a component of an investor’s portfolio.

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