Sanaenomics and the Sun

For thirty years, Japan was the punchline of every macro seminar.

Zero rates. Deflation. Zombie banks. An ageing society shuffling toward irrelevance.

Then the Nikkei hit an all-time high.

And suddenly everyone remembered Japan exists.

But most are buying the rally. Not the story.

The story is structural. And it's only halfway through.

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The Governance Revolution You Missed

In 2023, the Tokyo Stock Exchange did something unprecedented.

It told listed companies trading below book value to publish improvement plans — or face delisting consequences.

That's not a suggestion. That's an ultimatum.

And it worked.

Metric	2020	2024	Direction
Companies below P/B 1.0	~50%	~33%	Declining
Average TOPIX ROE	7.2%	9.8%	Improving
Share buybacks (annual)	¥6.5T	¥10.2T	Record
Cross-shareholding unwinding	35% of listed cos.	22%	Accelerating
Foreign ownership of Japanese equities	26%	31%	Rising

Japanese corporates hoarded cash for decades. They cross-held shares in each other like a keiretsu cartel. They treated ROE as a Western concept.

That era is over.

Companies are unwinding cross-shareholdings, returning cash, buying back stock, and hiring independent directors. Not because they want to — because the exchange told them to.

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Sanaenomics: The Policy Stack

"Sanaenomics" — coined for PM Sanae Takaichi — builds on Abenomics but with sharper teeth.

The three arrows are now:

• Corporate governance enforcement — TSE ultimatum, activist shareholder empowerment
• Monetary normalisation — BoJ ended negative rates (March 2024), yield curve control abandoned
• Real wage growth — Shunto wage negotiations delivered 5.1% increases in 2024, highest in 33 years

This isn't stimulus. It's structural transformation.

Japan isn't being reflated. It's being restructured.

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The Disinflation Death Spiral Is Broken

For the first time since the 1990s:

• Core CPI is sustainably above 2%
• Nominal GDP growth is outpacing real GDP
• Land prices in Tokyo and Osaka are rising again
• Corporate pricing power is returning — companies are actually raising prices

Japan spent 30 years fighting deflation.

It finally won.

And that changes everything about Japanese equities, the yen, and Japan's role in a global portfolio.

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Why Most Portfolios Are Underweight

Despite being the fourth-largest economy and the second-largest developed equity market, japan typically represents 5–7% of global allocations.

For most UK and European advisers, it's even lower — often 2–3%.

That was justifiable when Japan was a deflation trap.

It's indefensible now.

Market	2024 Return (local)	P/E Ratio	Dividend Yield
S&P 500	+24.2%	22.8x	1.3%
TOPIX (Japan)	+20.1%	14.2x	2.4%
STOXX 600 (Europe)	+8.6%	13.8x	3.2%
MSCI EM	+7.5%	12.1x	2.9%

Japan is delivering near-US returns at European valuations, with improving governance and a central bank that's normalising, not tightening.

If you're overweight US mega-cap tech and underweight Japan, you're making a concentration bet — not a diversification decision.

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The Yen Question

Yes, the yen is weak. And yes, that concerns people.

But consider: a weak yen plus rising corporate profitability plus eventual monetary tightening = yen appreciation upside layered on top of equity returns.

For GBP and USD investors, Japan is one of the few markets where the currency and the equity story could work in the same direction over a 3–5 year horizon.

That's rare. Price it in.

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The Bottom Line

Japan isn't a trade.

It's a structural reallocation story driven by governance reform, monetary normalisation, and real wage growth.

The punchline became the thesis.

It took thirty years. But the sun is rising.

Let's talk. Quietly. Properly. Professionally.