Japanese equities rallied in the quarter and outperformed most other developed and emerging markets. Sentiment was boosted by the Bank of Japan's monetary stimulus efforts, lower energy prices, and increased capital spending. Growth stocks outperformed value stocks, while large-caps outperformed smaller shares. Corporate news underpinned positive sentiment, with many Japanese companies beating earnings estimates for the prior quarter. Additionally, fears about the Chinese economy and therefore global growth subsided somewhat during the quarter. Finally, news that the European Central Bank was considering additional monetary easing measures and an increased allocation to domestic shares by local pension schemes also boosted shares.
The Japan Fund returned 8.19% in the quarter compared with 9.35% for the TOPIX Index and 8.97% for the Lipper Japanese Funds Average. For the 12 months ended December 31, 2015, the fund returned 14.89% versus 11.69% for the TOPIX Index and 12.03% for the Lipper Japanese Funds Average. The fund's average annual total returns were 14.89%, 6.73%, and −0.25% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2015. The fund's expense ratio was 1.05% as of its fiscal year ended October 31, 2014.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The Japan Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
We have maintained information technology services as the portfolio's largest overweight, with significant positions in the communications segment, where we see scope for improving earnings, while valuations also look attractive. We also like staffing agencies, where signs of a tightening labor market are a key positive for the industry.
Given the unchartered territory of Prime Minister Shinzo Abe's reforms and the likelihood of near-term disappointments, sentiment is likely to fluctuate as the efficacy and scope of "Abenomics" are called into question. Nevertheless, we have faith in Abe's political will to make Japan, in his own words, "a great and robust country." Policy efforts should provide further traction in the next two years, and we will continue to look for signs beyond this time horizon that Japan is turning into a durable improvement and self-help story.