Does The Sun Rise Again? with Howard Smith

FEG Insight Bridge

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On this episode of the FEG Insight Bridge Podcast, CIO Greg Dowling welcomes Howard Smith, Partner at Indus Capital Partners and Portfolio Manager for the Indus Japan Strategies. Howard shares his extensive experience investing in Japan, discussing the country’s economic resurgence, corporate reforms, and strategic positioning as an alternative to China. The conversation covers Japan’s role in high-tech industries like semiconductors and robotics, the impact of Abe’s three arrows policy, and the evolving landscape of corporate governance and M&A in Japan. They also delve into the yen carry trade unwind and its global implications, as well as the potential takeover of Seven & I Holdings by Canadian company Couche-Tard.

Tune in for key insights on Japan’s economic transformation and investment potential.
Key Takeaways:

Japan is experiencing renewed interest from investors after decades of stagnation. This resurgence is driven by corporate reforms, a strong manufacturing base, and Japan’s strategic positioning as an alternative to China.
Japan offers significant opportunities in high-tech industries such as semiconductors and robotics. The country benefits from lower valuations compared to Western markets and plays a crucial role in the global tech supply chain.
Japan’s corporate governance has improved, with increased board independence and better capital allocation. The potential takeover of Seven & I Holdings by Couche Tard highlights Japan’s evolving openness to foreign investment and corporate control.
The yen carry trade unwind caused significant market volatility. Additionally, Japan’s high public debt levels are sustainable due to low interest rates and the majority of debt being held by the central bank. However, the terms of trade and reliance on energy imports pose ongoing risks.

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Chapters

1. Introduction (00:00:00)

2. Episode and Introduction of Howard Smith (00:00:30)

3. Howard Smith and Indus Capital Partners' Focus on Japan (00:01:38)

4. Cultural Differences between Japan and the West (00:04:48)

5. Japan's Economic Makeup (00:07:20)

6. The History Japan's Economy and the Inflection Point of Today (00:10:25)

7. What is the Opportunity to Invest in Japan Today? (00:19:41)

8. The Dynamics of Japan's Relationship with China (00:22:18)

9. Perspective on the Yen Carry Trade Unwind (00:25:48)

10. Detail on Japan's Fiscal Situation (00:29:05)

11. Recent News on 7-Eleven and Circle K (00:32:16)

12. Convenient Stores in Japan vs. the U.S. (00:34:48)

13. 7-Eleven as a Litmus Test? Expanding on Japan's Markets (00:37:36)

14. Learn More about Japan with these Book Recommendations (00:41:31)

15. Lightning Round: Godzilla or Japanese Anime? Sushi or Yakitori? (00:43:54)

59 episodes

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