Results analysis from Kepler Trust Intelligence

Schroder Japan (SJG)

16/04/2026

Results analysis from Kepler Trust Intelligence

Schroder Japan Trust (SJG) has released its half-year results for the six months to January 2026, reporting NAV and share price total returns of 18.9% and 27.4%, respectively, outpacing the TOPIX's 15.3% return. SJG's discount narrowed to 6.7% by period-end, reflecting strong performance and growing traction in its enhanced dividend policy. Over the six-month period, the board repurchased 991,813 shares, equivalent to 0.9% of shares in issue at the start of the period, at an average discount of 9.7%. The board has announced a change to the fee structure, effective 01/08/2026, with management fees now charged on the lower of NAV or market capitalisation. This is beneficial when the trust trades at a discount, reducing fees for shareholders. The headline rate will fall from 0.75% to 0.70% on the first £200m, with 0.65% above this level.

Kepler View

SJG's latest results come against an increasingly constructive backdrop for Japanese equities, albeit one that is becoming more nuanced. Whilst value and smaller companies provided a supportive tailwind, outperformance was ultimately driven by stock selection within key evolving themes. Corporate governance reforms are increasingly translating into improved capital allocation and shareholder returns, whilst the shift away from deflation is supporting a more durable earnings backdrop.

At the same time, structural themes such as AI, automation and defence are broadening beyond headline beneficiaries, creating opportunities further down the value chain where valuations remain more attractive. Importantly, the portfolio has benefitted from these dynamics without relying on the most obvious or crowded areas of the market. For example, within AI, Masaki has focussed on underappreciated enablers such as JX Advanced Metals. This reflects his broader, valuation-aware approach, favouring second-order beneficiaries over more crowded 'proxy' trades, which we think allows the portfolio to access structural growth via differentiated avenues, often without paying the premium attached to widely owned names.

There are, however, some near-term considerations. Valuations across the Japanese market have moved higher, and global uncertainties, including geopolitical tensions and questions around the sustainability of AI-related investment, may drive periods of volatility. SJG's positioning, particularly its exposure to smaller companies, could see performance fluctuate in such an environment, especially if market leadership shifts back towards more growth-oriented areas.

The portfolio offers differentiated exposure to a market undergoing structural change, supported by its focus on underappreciated, second-order beneficiaries and a meaningful allocation to small- and mid-cap companies, where stock selection can be particularly rewarding. Alongside this, SJG offers the highest yield in the sector, broadening its appeal beyond traditional income markets such as the UK and Europe. Taken together, we think SJG represents a differentiated and potentially mispriced way to access Japan's evolving equity story.

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