Fund Spotlight: Japan’s structural revival accelerates, this fund is well positioned to capture it

• Japan's structural renaissance remains firmly in place, supported by corporate governance reforms, sustained wage growth, and monetary policy normalisation, which together are driving stronger earnings, shareholder returns, and domestic demand.

• The Amova Japan Equity SGD takes a high-conviction, benchmark-unconstrained approach, targeting governance reform beneficiaries, domestic reflation winners, and overlooked small- and mid-cap companies beyond Japan's mega-cap index heavyweights.

• The portfolio is positioned for Japan's key structural trends, with meaningful exposure to Industrials and Financials that stand to benefit from automation, capital investment, and rising interest rates.

• The fund has consistently outperformed both TOPIX and peers, while demonstrating superior downside protection and drawdown management over the rolling 5 years.

• Investors can access the strategy through lump-sum cash investments, a Regular Savings Plan from SGD100 per month, or CPF-OA funds, providing multiple ways to participate in Japan's long-term growth story.

Japan's equity market is not just a cyclical recovery story. It is undergoing one of the most profound structural transformations seen in a developed market in decades.

For investors, the opportunity extends far beyond a weaker yen or a temporary earnings boost. Instead, the investment case for Japan today rests on three interlocking themes.

Corporate governance reform is entering its next phase. Japan's corporate governance revolution continues to gather momentum. In April 2026, the Tokyo Stock Exchange introduced a revised Corporate Governance Code that shifts the focus from compliance to outcomes, placing greater emphasis on capital efficiency, shareholder returns, and accountability. The message is clear: companies are no longer being judged on whether governance policies exist, but on whether those policies deliver tangible improvements in profitability and shareholder value.

For investors, this creates a multi-year pipeline of opportunities as more companies accelerate buybacks, unwind cross-shareholdings, improve capital allocation discipline, and raise return-on-equity targets.

Rising wages are reviving domestic consumption. Japan's 2026 Shunto wage negotiations delivered an average wage increase of 5.26%, marking the third consecutive year of wage growth above 5%. While inflation has absorbed part of these gains, government energy subsidies measures and easing food-price pressures have helped real wages return to positive territory during the first quarter of 2026.

This matters because Japan's recovery is increasingly being driven by domestic demand rather than exports alone. Rising real incomes are supporting household spending, creating a more durable foundation for economic growth and benefiting domestically focused businesses that were overlooked during earlier phases of the market rally.

Monetary policy normalisation is creating new winners. The Bank of Japan is also steadily progressing toward policy normalisation. We expect the policy rate to rise from 0.75% to 1.0% as early as in the upcoming June policy meeting.  Core inflation has remained above the BOJ's 2% target for more than three years, supported by sustained wage growth and improving consumer demand.

For the first time in decades, Japanese banks and financial institutions are operating in an environment where rising interest rates can meaningfully improve profitability. This creates a powerful earnings tailwind that could persist for years rather than quarters.

While many investors have rushed into passive mega-cap index trackers to ride this wave, the next leg of Japan’s multi-year bull run is broadening. The combination of catalysts is increasingly benefiting domestically focused small- and mid-cap companies. Many of these businesses remain under-researched and under-owned, creating fertile ground for active managers to uncover opportunities beyond the benchmark's largest constituents.

Against this backdrop, the Amova Japan Equity SGD stands out as a strategy designed not simply to participate in Japan's resurgence, but to actively identify the companies most likely to benefit from it, regardless of company size.

Amova Japan Equity Fund: A fund built for structural transformation

The Amova Japan Equity SGD Fund is managed by Amova Asset Management, formerly Nikko Asset Management, since its inception on 31 December 1986. As part of the Sumitomo Mitsui Trust Group, one of Japan's largest financial institutions, the investment team benefits from decades of relationships with corporate management teams across the country. These local connections provide valuable insights into companies undergoing strategic transformation and governance improvements.

Unlike passive strategies that are constrained by benchmark weights, the fund adopts an unconstrained, high-conviction approach. The managers have the flexibility to overweight or underweight TOPIX constituents and can invest in off-benchmark opportunities where conviction is high.

This flexibility is particularly valuable in Japan, where many smaller companies remain under-researched and underappreciated. Limited analyst coverage creates opportunities for active managers to identify businesses whose earnings potential and governance improvements have yet to be fully recognised by the market.

Figure 1: The fund’s sector allocation has a deliberate and reform-aligned tilt

One of the most distinctive features of the portfolio is its 30% allocation to Industrials. This is a deliberate positioning that reflects the managers' conviction in two of Japan's most powerful structural trends: governance reform and demographic-driven automation. As labour shortages intensify, Japanese companies are increasingly investing in robotics, factory automation, and precision manufacturing technologies. At the same time, governance reforms are encouraging companies to deploy capital more productively, supporting investment in growth initiatives rather than simply accumulating cash.

The portfolio's 12.1% allocation to Financials reflects another key investment theme: rising interest rates. Major holdings such as Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group stand to benefit from expanding net interest margins and improving profitability as monetary policy normalises.

Meanwhile, the fund's more modest 12.6% allocation to Information Technology demonstrates a disciplined approach to the AI investment theme. Rather than chasing highly crowded semiconductor names, the managers focus on technology companies with durable competitive advantages and attractive governance characteristics.

For investors already holding broad Japan index exposure through our recommended ETF, Xtrackers Nikkei 225 UCITS ETF 1D (LSE: XDJP), the fund can serve as a complementary allocation. The Xtrackers Nikkei 225 UCITS ETF 1D allocates nearly 30% of its portfolio to the information technology sector and has significant exposure to semiconductor-related names, including Advantest (9.5%) and Tokyo Electron (8.6%). Together, the two strategies provide investors with a balanced mix of AI-driven growth exposure and broader participation in Japan's structural transformation.

Beyond sector positioning, the portfolio's stock selection provides further insight into the managers' investment thesis. The fund holds 89 stocks, offering a balance between diversification and active conviction, with the top ten holdings accounting for approximately 26.8% of assets (Table 1).

Many of these holdings are closely aligned with the fund's core themes of governance reform, economic reflation, and monetary normalisation. Financial heavyweights Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group are well-positioned to benefit from higher interest rates. Toyota Motor Corporation combines exposure to a weaker yen with a compelling governance-improvement story, having made significant progress in simplifying its corporate structure and unwinding USD19 billion worth of cross-shareholdings. Meanwhile, Hitachi, Ltd. exemplifies the transformation underway across corporate Japan. It has streamlined its business portfolio, exited non-core operations, eliminated listed subsidiaries, and repositioned itself around higher-value industrial and digital infrastructure businesses.

The portfolio also demonstrates a willingness to look beyond Japan's largest companies in search of alpha. Holdings such as CKD Corporation, a specialist in factory automation and precision pneumatic systems, and DMG Mori Co., Ltd., a global leader in CNC machine tools, provide exposure to long-term themes such as automation, reshoring, and industrial modernisation. These less widely followed companies are precisely where active managers can leverage local research capabilities to uncover opportunities before they become broadly recognised by the market.

Table 1: The fund’s top holdings reflect a differentiated positioning from TOPIX

Holdings	Sector	Fund	Benchmark		Difference
Mitsubishi UFJ Financial Group	Financials	4.2%		3.3%	0.9%
Sumitomo Mitsui Financial Group	Financials	3.1%		2.3%	0.8%
Toyota Motor Corp.	Consumer Discretionary	3.1%		3.1%	0.0%
Sony Group Corporation	Consumer Discretionary	2.8%		2.1%	0.8%
Mitsui & Co., Ltd	Industrials	2.6%		1.7%	0.9%
Hitachi, Ltd.	Industrials	2.5%		2.4%	0.1%
Nisshinbo Holdings Inc.	Industrials	2.2%		-	2.2%
Mitsubishi Estate Company	Real Estate	2.2%		-	2.2%
CKD Corporation	Industrials	2.1%		-	2.1%
DMG Mori Co., Ltd.	Industrials	2.0%		-	2.0%
Source: Amova Asset Management. Data as of 30 April 2026.

Consistent alpha generation with strong downside management 

A compelling investment process ultimately needs to be reflected in performance.

The Amova Japan Equity SGD Fund has outperformed both its TOPIX benchmark and peer group across every major measurement period, from year-to-date returns to since-inception performance.

More notably, excess returns have been strengthening over time: the 1-year excess return of 15% over benchmark is meaningfully higher than the 3-year figure of 7.0% and the 5-year figure of 4.6%, suggesting the strategy is increasingly well aligned with prevailing market dynamics.

Figure 2: The fund outperformed the benchmark and peers across all time periods

The true test of an active strategy is not its peak performance in strong markets, but its ability to balance participation in upside capture with resilience during drawdowns. Over the five calendar years from 2021 to 2025, the fund outperformed the TOPIX and peer group in four of the five years, and delivered lower losses than both the TOPIX and its peer average in 2022.

Figure 3: The fund outperformed both TOPIX and peers during market downturn in 2023

This downside protection is one of the fund's most attractive characteristics. Over a rolling five-year period, the fund recorded a maximum drawdown of -26.7%, outperforming both the TOPIX (-28.4%) and the peer group average (-27.6%). Avoiding deeper losses during market corrections is critical for long-term wealth creation. The smaller the drawdown, the less recovery is required to reach new highs.

The portfolio’s diversified, unconstrained approach across growth, value, large-cap, and mid-cap opportunities is a key driver of its resilience. Rather than anchoring to a single dominant theme, the managers construct a balanced allocation that blends globally competitive exporters, domestic reflation beneficiaries, financial institutions, and governance reform stories. This multi-pronged positioning allows the portfolio to capture a broader set of return drivers and remain adaptable across different market regimes.

Figure 4: The fund demonstrates the best 5-year drawdown management

Who is this fund suitable for?

The Amova Japan Equity SGD Fund may be particularly attractive for three types of investors.

First, long-term growth investors seeking to participate in Japan's structural transformation. Japan's governance reforms are a decade-long story, and the patient investor captures the full compounding of buybacks, dividend growth, and ROE re-rating. Complementing passive exposure through the Xtrackers Nikkei 225 UCITS ETF 1D (LSE: XDJP), this fund provides meaningful allocation to small- and mid-cap companies that are often under-researched and less efficiently priced. These segments tend to offer more direct exposure to domestic reflation dynamics and corporate reform catalysts, making the strategy particularly suited for investors with a medium- to long-term horizon.

Second, investors who are constructive on Japan’s outlook but uncertain about near-term entry timing. The Regular Savings Plan allows for systematic accumulation, helping to smooth volatility associated with BoJ policy shifts and yen fluctuations. This disciplined approach is well suited for investors without strong tactical conviction. With as little as SGD 100 per month, it also enables gradual portfolio construction over time in a cost-effective manner.

Finally, CPF investors looking to enhance long-term returns may find the fund compelling. The fund is eligible for subscription via CPF-OA with no initial sales charge on CPF subscriptions. The fund's 5-year annualised return of +13.7% is well above the CPF-OA floor rate of 2.5%, making it a compelling vehicle to put CPF-OA balances above the required minimum to work over the long term.

Amova Japan Equity SGD – a high convicted opportunity in Japan’s structural upcycle

Japan’s transformation is already underway and still has significant room to run. Ongoing corporate governance reforms continue to unlock shareholder value through improved capital efficiency, higher dividend payouts, and sustained share buybacks. At the same time, rising wages are strengthening domestic demand, while gradual monetary normalisation is creating new earnings opportunities across a broader range of sectors. Importantly, these structural shifts are also expanding the investable opportunity set beyond the mega-cap names that have dominated market headlines in recent years.

For investors seeking a strategy that can actively identify the winners of Japan's next chapter, the Amova Japan Equity SGD offers a compelling combination of deep local expertise, flexible portfolio construction, and a proven track record of generating alpha while managing downside risk.

As Japan's structural renaissance continues to unfold, this is a fund well positioned to participate in the opportunities ahead.

Declaration:

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report – including all investment theses, ratings, price targets and conclusions – has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.