For U.S. dollar investors, the strong yen helped push Japanese stock returns up 1% for the quarter. However, in local currency terms, Japanese equities sold off nearly 8%. The country's central bank's aggressive monetary policies have not stimulated economic growth or inflation. The Japanese economy avoided recession in the first quarter, as gains in government spending outweighed a decline in business investment. The yen continued to strengthen versus the dollar, acting as a weight on Japanese exporters. Japan's household spending remained below forecasts and there was muted demand for many of its exported goods.
The Japan Fund returned 5.35% in the quarter compared with 1.46% for the TOPIX Index and 0.56% for the Lipper Japanese Funds Average. For the 12 months ended June 30, 2016, the fund returned 5.27% versus −6.93% for the TOPIX Index and −6.60% for the Lipper Japanese Funds Average. The fund's average annual total returns were 5.27%, 8.13%, and 1.06% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 2016. The fund's expense ratio was 1.05% as of its fiscal year ended October 31, 2015.
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.
The portfolio's industrials and business services holdings contributed the most to results in the quarter, followed by telecommunication services and consumer discretionary shares. Our materials and health care stocks lagged in the period.
We believe Japanese stocks may be poised for further volatility in the short term, as currency and other economic concerns linger. We remain optimistic that the market will regain its footing over the medium term, however. Corporate profits have improved notably in recent years, and we are encouraged by companies' growing focus on shareholder value. We believe such an environment will favor our emphasis on investing in durable and improving businesses capable of weathering economic turbulence.