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Franklin Japan Fund - News
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Merger into Franklin Templeton Japan Fund
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Wednesday, 3 December 2008
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Official Announcement
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The Templeton Japan Fund merged into the Franklin Templeton Japan Fund with effect from close of business on Friday November 21, 2008.
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Franklin Tempeton Japan comment - Jul 06
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Monday, 28 August 2006
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Fund Manager Comment
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In July, Franklin Templeton Japan Fund outperformed its benchmark, returning a net -0.24% (in Japanese yen), while the TOPIX returned -0.94%.
The Japanese equity markets followed the same pattern in July already seen the previous month, tumbling in the first half of the month only to make good these losses before month's end. The market fall in the early part of the month was sparked by geopolitical concerns in Asia and the Middle East, plus a decline in the U.S. equity markets. But with the markets increasingly expecting the U.S. Federal Reserve to mark a pause after two years of raising short-term interest rates, and with Japanese corporates reporting good quarterly results, the markets managed to erase the bulk of their early-month losses by the end of July.
Overweight positions in the mining and transportation equipment sectors and an underweight position in the "otherfinancing business" sector helped the fund's overall performance during the period.
At end July, the fund was also overweight information & communication and transportation equipment stocks, while it was underweight defensive sectors (electric power and gas, pharmaceuticals) as well as construction.
Outlook
The Bank of Japan (BOJ) decided to end its five-year zero-interest rate policy in July, raising its target for the uncollateralized overnight call rate to 0.25% at its monetary policy meeting of July 13 and 14. The official discount rate at which the central bank lends to commercial banks at times of high funding demand was also raised (to 0.4% from 0.1%). However, the financial markets absorbed both pieces of news without much reaction as the BOJ's decision to abandon its zero-interest rate policy had been expected.
That being said, it is important not to underestimate the impact the ending of the central bank's five-year-old zero interest rate policy may have on Japan's economic fortunes. The end of this policy can be seen as richly symbolic from different perspectives.
(i) It may also mean the end of deflation. Under deflationary pressures, prices had continued to fall in recent years in Japan, encouraging corporates and individuals to withhold spending. However, as inflation seeps into the economy and prices start going up gradually, we expect spending to increase.
(ii) It may also lessen expectations of lower interest rates in the future, thus pushing companies/consumers to spend on capex or housing before funding costs increase.
(iii) It may change how the Japanese invest their money. Up until now, people dealt with the very low returns available in Japan by investing in foreign stocks and bonds, accepting higher investment risks in the process. We will pay particular attention to any sign that the increase in interest rates is changing money flows.
While there seems to be some concern that an increase in interest rates will have a negative impact on the Japanese economy, we don't think this will be the case.
The fundamentals of the Japanese economy appear robust. In fiscal-year 2006, real gross domestic product (GDP) growth is expected to reach about 2.5% (source: Monthly Survey of Japanese Economic Forecasts / Economic Planning Association). This is consistent with real GDP growth of 2.3% in 2004 and 2.6% in 2005. With regard to prices, the June Corporate Goods Price Index (CGPI) rose at an annualised rate of 3.3%, the same rate as in May. Japan's Consumer Price Index (excluding fresh food) rose 0.5% during the period January - April, and 0.6% in May - June. Looking at these numbers, we think that a short-term interest rate of 0.25% will not act as much of a drag on the Japanese economy. Even considering the factors outlined above, the current BOJ policy we believe will serve to stimulate economic activity rather than hurt it.
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