Japanese shares: riding on the shoulders of giants

Investors in Japan enjoyed a heady ride over the past three years as the market rose 17% p.a.² 

Some of this resurgence results from reforms driven by the Tokyo Stock Exchange (TSE) which focused on Japanese firms’ low Return on Equity.³ Thanks to these reforms, corporate Japan’s long-standing reluctance to address balance sheet inefficiencies has now pivoted to a newly found zeal for buybacks and dividends. 

The unwinding of strategic cross-shareholdings is also gathering momentum – the value of those separations was up 53% in FY24.⁴ That’s good news because for too long, cozy cross-shareholdings – where large companies own large chunks of each other – preserved the corporate status-quo and hamstrung Japan's productivity growth. 

Unleashing the pent up forces of creative destruction held at bay for too long and championed by many minority shareholders means Japan is now a genuinely tantalising prospect.

The Platinum Japan Fund, which was up 21% in FY25, benefited from these trends. But of greater importance was a clear strategic choice – to overweight the Fund with a bloc of large, globally-competitive companies that would be best positioned to benefit as the demise of the ancien régime realigns the corporate landscape. It is on the shoulders of such globally competitive titans – all leaders in their fields - that Japan’s economic revival can be secured. Let’s look at a few of our holdings in the consumer space.

Nintendo

Ten years ago, markets feared Nintendo’s success with products like the Wii gaming console would be competed away by mobile and table gaming. 

Nintendo refused to compromise the player experience by offering games on these new – and to their mind – inferior platforms. They had a fanbase of millions waiting to buy new consoles. The Switch, released in 2017, sold 153 million units. In 2025, the Switch 2 sold 3.5m units within four days of launch – Nintendo’s fastest selling console launch ever.

Nintendo is an extraordinary business. Since 1983 it’s sold more than 5.9 billion video games and 860 million hardware units.  It has one of the world’s most valuable libraries of character IP – think Super Mario, Pokémon, Pikmin, Zelda and Splatoon. Its share price is up 500% over the past decade.^{5, 6}

Fast Retailing (Uniqlo)

If you’re layering up to stay warm this Australian winter, Uniqlo may now be your go-to choice. Uniqlo is the flagship brand in the Fast Retailing stable, growing rapidly in Australia, the US, Europe, Asia and India. Fast already has more than 3,500 stores around the globe.  

We view Fast Retailing as the Toyota of the apparel world. They know exactly who their clients are and what their needs are. Despite the name, Fast Retailing is not ‘fast fashion’ - waste is shunned. Their core concept is: ‘LifeWear’ - functional and durable clothing at a competitive price point that appeals to a broad range of consumers. 

Fast does not shy away from its ambition to become the top global apparel brand and this determination is matched with an impressively efficient supply chain that is an overlooked source of strength. The great news for Fast – and their investors – is that the global fashion industry is highly fragmented, with plenty of room for structural growth for the larger players. 

Sony

Sony is now a global consumer and entertainment powerhouse with properties spanning music, gaming and movies. It makes 80% of its revenue outside Japan.⁶ It has been shifting away from its traditional reliance on consumer electronics. Entertainment revenue rose from ~30% of revenues in FY12 to account for 61% of Sony sales in FY24.
 

• Sony generated US$32 billion in annual revenues from its Games division – the PlayStation Network has over 120 million Monthly Active Users. The Games business has doubled revenue over the past decade. 
• Sony Music ranks #1 and #2 in music publishing and recorded music globally. It holds an impressive catalog with artists from Beyoncé to the Beatles on its roster. Sony Music earned US$12.6 billion in the year to March 2025.  
• Sony Pictures is one of the Big Five movie companies with US$10.3bn in revenues and key franchises such as Spider Man. Sony also owns Crunchyroll, the fast growing anime streaming service. It had over 17 million paid members as at end March 2025.⁷

Like Nintendo, Sony now needs to be valued not just on the revenue it makes from producing TVs, movies and music, but its growing stable of entertainment IP.  

The Faustian bargain 

All these companies – plus others like Toyota and factory automation specialist Keyence – are large, global and leaders in their fields. They generate consistently better returns than their smaller peers and their valuations reflect that. They’re not bargains – but they are attractive long-term investments.

To get a full understanding of the strength of these companies means understanding Japan’s recent economic history and the intricacies of its culture. 

The deflationary decades following the collapse of Japan’s real estate bubble saw Japanese firms squeezed by low growth and an inability to raise prices. Yet they still needed to meet the social employment obligations that are an intrinsic part of Japan’s business practices – such as jobs for life and seniority-based pay. The only way they could thread that course was through ongoing cost cutting. 

It was a Faustian bargain. They met their social employment obligations but wage growth stagnated. Investment in tangible capital (new capacity or machinery) and intangible capital (IT budgets, R&D, workforce reskilling) were deprioritised by necessity or choice. Innovation and productivity growth slowed. Many of Japan’s corporate giants lost business to more nimble Asian competition. 

A culture of self-reliance means many of these companies didn’t realise how far behind they’d fallen in innovation, automation and digitisation. It’s now clear that many cut too deeply and undermined their long term competitiveness. A rethink is now underway, but it may be too little, too late for many.

Elite companies like Sony, Fast, Toyota, Nintendo and Keyence avoided this trap. Buttressed by rock-solid brands, with outstanding products and quality management, they continued to invest in their workers, technology and innovation. 

These companies increasingly stand out from their Japanese peers who now face another dilemma. They can raise payouts to satisfy the new shareholder-focused investment markets in the short term. Or choose to invest to ensure long-term competitiveness. 

The best companies aren’t constrained by this choice. They’re Japanese, but the world is their customer. These elite giants - Toyota, Sony, Nintendo, Keyence and Fast Retailing - are our core holdings. They’ve been key to our Fund’s performance. 
 

• Like to know more about the Platinum Japan Fund, its performance and holdings? Visit our Platinum Japan Fund page. 
• Want to invest with Platinum?
• In coming weeks we’ll dive more deeply into the rationale for investing in Japan – its geopolitical and technological advantages and how its culture shapes its economy and sharemarket. 

1. Since inception in 1998 the Platinum Japan Fund has averaged a 12% annual return. All Platinum Fund returns quoted in this article are after fees and costs, before tax and assume the reinvestment of distributions. Historical performance is not a reliable indicator of future performance.
2. Source: MSCI Japan Index to 30 June 2025
3. Return on Equity measures how efficiently a company uses shareholder capital to turn a profit. 
4. The value of those separations was up 53% in FY24. Sources: Factset, Nikkei, July 2025
5. For context, the producers of the James Bond films reaped seven billion dollars from a character library of one. 
6. Nintendo information sourced from: www.nintendo.co.jp/corporate/release/en/2025/250611.html and www.nintendo.co.jp/ir/en/finance/hard_soft/index.html
7. Sony information sourced from www.sony.com/en/SonyInfo/IR/library/presen/strategy/pdf/2025/speech_E.pdf and www.sony.com/en/SonyInfo/IR/library/corporatereport/CorporateReport2024