Japanese Stocks Are Trouncing the S&P 500. 5 Funds to Consider.

The Tokyo stock market is roaring after more than three decades of silence. In recent weeks, Warren Buffett has beefed up his holdings of Japanese trading companies while the tide of cash pouring into

BlackRock
’s
Japan fund has risen to fresh highs. 

The enthusiasm makes sense. Businesses in Japan known for hoarding money as a safeguard against hard times seem to have shifted their cautious stance and are handing cash back to shareholders.

An unprecedented ¥21.28 billion ($149 million) in dividends was returned by the 225 companies in the Nikkei Stock Average in the fiscal year that ended in March, while share buybacks ballooned to a record ¥8 trillion over the same period, according to Dow Jones Market Data. The levels are pint-size compared with the U.S., where S&P 500 companies paid out $557.83 billion in dividends and made share buybacks totaling $933.15 billion in 2022, but they have grown significantly in the past two years. Dividends have grown 51% since 2021 while buybacks have more than doubled.

And investors have reason to hope the trend will continue.

Honda Motor

(7267: JP) has decided to pay a record ¥150 a share in the year ending March 2024. Citizen Watch (7762: JP) earlier this year said it would buy back nearly 26% of its shares by mid February, implying a buyback program worth ¥65.59 billion, the largest ever for a Japanese fiscal year, though

Mitsubishi UFJ Financial Group

(8306: JP), Japan’s largest lender, has paused repurchases citing uncertainty about bankruptcies worldwide.

Buybacks and dividends typically boost share prices—Honda Motor stock was up 45% in the first half of this year, while Citizen gained 46%—but the people who run Japan’s main stock market are asking for more. Nearly 45% of the companies in the Nikkei Stock Average trade for less than the value of the assets on their books, compared with 5.2% of those in the S&P 500, so the Tokyo Stock Exchange is pressing for change.

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