A Multiyear Japan Stock Market Bull May Be On the Way
I love bulls. As long as there’s no matador involved, bulls should be allowed to run. And my take is: run they will. And if you’re eyeing Japan’s stock market, you might just catch the next big wave.

Picture this—a cocktail of nominal GDP growth, decent wage hikes, and healthy inflation levels. Stir in some new capital investments, and you’ve got yourself a potent recipe for equity outperformance. Add a dash of yen weakness, and suddenly, visiting Tokyo, Kyoto, and beyond starts sounding like both a financial and cultural win.
Economic Tailwinds: Why Japan Now?
Japan’s economy is stirring from its decades-long slumber, with a combination of factors aligning to drive growth. Nominal GDP is showing consistent improvement, bolstered by government initiatives encouraging higher wages and consumer spending. For example, the Kishida administration has been urging corporations to increase pay scales, a move critical to boosting disposable income and stimulating domestic demand. Healthy inflation levels, hovering around 2%—a sharp contrast to Japan’s historical deflationary struggles—are providing additional momentum.
These trends, coupled with increased capital investments, paint a brighter picture for Japan’s economy. Major corporations are ramping up spending on innovation, automation, and green technology, further enhancing productivity. The yen’s relative weakness also plays a pivotal role, making Japanese exports more competitive globally and attracting foreign investments to a market often undervalued compared to its Western counterparts.
Market Trends: A Runner Ready to Sprint
Let’s talk numbers. The iShares MSCI Japan ETF (EWJ) has doubled over the past 15 years, which sounds great—until you remember it’s still trading at levels we last saw in 1997. It’s like a runner who spent decades tying their shoelaces but is finally ready to hit the track. There’s room to catch up.
In comparison, the S&P 500 and other major global indices have consistently set new highs, making Japan’s relative underperformance striking. This disparity suggests that Japan may now be positioned for outsized gains, particularly as its economic fundamentals strengthen. EWJ, with its modest 1.5% dividend yield, might be a solid place to start exploring. However, for those willing to dig deeper, Japan’s market is brimming with untapped gems—think small- and mid-cap companies flying under analysts’ radar, just waiting for their time in the spotlight.
Uncovering Hidden Gems: Beyond the Surface
Small- and mid-cap stocks in Japan offer unique opportunities. Many of these companies operate in niche markets with strong growth potential. For example, robotics firms catering to an aging population or green energy startups addressing global climate goals. These businesses often remain undervalued due to limited coverage by analysts, presenting a chance for savvy investors to capitalize on their growth trajectories.
One such gem could be Toto Ltd. (TOTDY). I was at the airport the other day, and I badly needed to go to the restroom. Who saved my ass-ymetric cost-benefit analysis of the dilemma I was facing at the time? That's right, a toilet—a Toto toilet.
Spotlight on Toto Ltd.: A Global Innovator
Toto Ltd. is a Japanese multinational corporation specializing in plumbing fixtures, renowned for its innovative products like the Washlet. The company has revolutionized bathroom culture, combining cutting-edge technology with sustainability. From self-cleaning toilets to water-saving designs, Toto has carved a niche for itself in both domestic and international markets.
Recent Financial Performance:
- Revenue: ¥702.28 billion, a slight increase from ¥701.19 billion in the previous fiscal year.
- Net Income: ¥37.20 billion, a decrease of 4.49% compared to the prior year's ¥38.94 billion.
- Operating Income: ¥42.77 billion, down from ¥49.12 billion in the previous year.
While recent performance shows slight declines in profitability, Toto’s long-term prospects remain robust. Its commitment to innovation and sustainability aligns well with evolving consumer preferences and regulatory trends worldwide.
Business Strategy: Toto’s "New Shared Value Creation Strategy TOTO WILL2030" focuses on:
- Achieving a carbon-neutral and sustainable society by 2050.
- Providing clean, comfortable, and healthy lifestyles by 2030.
This forward-thinking approach positions Toto to thrive in a world increasingly focused on environmental, social, and governance (ESG) factors.
The Competitive Landscape
Toto faces stiff competition from global brands like Kohler and Grohe. Competing with them is no small feat, but Toto has innovation up its sleeve—just like its Washlet has, well... other features. Indeed, its emphasis on innovation and sustainability sets it apart. For instance, Toto’s Washlet technology, which integrates bidet functionality and advanced hygiene features, has become synonymous with luxury and comfort. The brand also benefits from strong customer loyalty in Japan and growing demand in international markets, particularly in Asia and North America.
Stock Performance: Where Does Toto Stand?
As of January 15, 2025, Toto Ltd.'s stock (TOTDY) was trading at $23.41, with a 52-week range between $23.41 and $31.35. The stock’s trailing P/E ratio of 16.74 suggests it is reasonably priced, potentially offering room for gradual appreciation. Add a 2.5% dividend yield, and Toto becomes an attractive option for income-oriented investors.
Despite its steady fundamentals, the stock trades at levels seen 10 or even 20 years ago—a reflection of Japan’s broader "lost decades." Like many Japanese equities, Toto has significant catch-up potential, especially as the market shifts in its favor.
Stock Price of Toto (TOTDY) - Source: Fidelity.com
Risks and Opportunities: Balancing the Scales
While Toto’s outlook appears promising, several risks warrant consideration:
- Currency Fluctuations: The yen’s volatility could impact profitability, particularly in export markets.
- Economic Uncertainty: Global economic slowdowns or geopolitical tensions may weigh on consumer spending and business investments.
- Execution Risks: Successfully implementing its ambitious TOTO WILL2030 strategy will require significant investments and meticulous planning.
On the flip side, opportunities abound. As sustainability becomes a central theme across industries, Toto’s eco-friendly products position it as a leader in a rather stable, incrementally growing market (because let’s face it—who wants to go without a toilet?). Its global expansion efforts and continued focus on innovation also bode well for future growth.
Perspective on Stock Appreciation Potential
Toto Ltd.’s commitment to sustainability and innovation positions it favorably in the market. The company’s strategic initiatives, coupled with Japan’s broader economic tailwinds, suggest potential for long-term growth. While its stock may not deliver dramatic short-term gains, steady appreciation combined with a reliable dividend could make it a worthwhile addition to a diversified portfolio.
Enjoy the Ride with Funanc1al
While you’re pondering all this, remember—Funanc1al isn’t just about stock tips. It’s about enjoying the journey, embracing the thrill of discovery, and finding joy in the unexpected. Check back for fresh ideas from Japan and beyond. After all, this is one bull you don’t want to miss—or a stampede you’ll want to join!
Image Credit: RobertTrzaska from Pixabay.
Quick links
Search
Privacy Policy
Refund Policy
Shipping Policy
Terms of Service
Contact us
About us
FUNanc!al distills the fun in finance and the finance in fun, makes news personal, and helps all reach happiness.