Japan Deep Value
Japanese Equity Research, Deep Value & Below-Book Opportunities
Japanese small caps remain a strong short because TOPIX is removing almost all of them, leaving no passive investor on the other side; M&A is a short seller's only real fear. Quants shorting stocks at 2x EV/EBITDA and 0.3x book are winning. More pain is likely for deep-value holders while they wait for companies to delist at higher prices. x.com x.comÂ
Minority investors in Japanese equities have little upside outside shareholder activism and M&A-related delisting, even as the Nikkei and AI stocks rally. The new TOPIX index had only 35 additions and 684 deletions, and even companies that significantly improved governance, returns or earnings won't qualify to stay. The future is delisting, at higher prices. x.comÂ
Japanese stocks face more selling if the Bank of Japan steps in to support the yen, because a stronger yen hurts the country's exporters. Topix fell 1.3% today on those worries. The last time this happened, Korea's KOSPI hit its eighth circuit breaker of 2026 and the Nikkei lost over 2,600 points. The yen is the key thing to watch. x.comÂ
Japanese equities face an eventual collapse as decades of QE and similar tools, which masked demographic-driven productivity decline, come due through currency and bond collapses, with Japan first because it used them first. Per @puckrin, the yen is at its weakest since 2024 even after a hike to 1%, the highest since 1995, as carry trades into US assets persist despite $73bn of intervention. A faster drop in Japanese government bond values should cap the Nikkei. x.com x.comÂ
Japanese equities are where liquidity has to go because the Bank of Japan cannot tighten without blowing up Japanese government bonds. @Globalflows notes the Nikkei just made an all-time high and frames it as the credit cycle at work. x.comÂ
Japanese equities are under attack from every direction after Japan and the US intervened to rescue the yen from a 40-year low. A stronger yen crushes export giants' overseas profits, while surging bond yields raise borrowing costs, the AI trade that drove the Nikkei to records unwinds, and fears grow over Japan's debt pile. The Nikkei has fallen about 16% in a month; the currency rescue may have broken the stock market. x.comÂ
Japanese and South Korean stocks sit directly on top of the crowded AI trade, which is unwinding as global bond yields head toward multi-decade highs and oil tops $90. That mix of higher inflation and borrowing costs undercuts valuations of the most expensive growth stocks. Japan's Nikkei fell 3.2% and Korea's KOSPI more than 6%, triggering trading curbs, as Samsung, SK hynix, Kioxia and SoftBank fell 8-13%. If oil and yields stay high, Asia may be where the pressure breaks through first. x.comÂ
Santec's optical-components moat deserves a much richer multiple. Structural factors in Japan, such as foreign investors being underweight, keep quality names mispriced for years, making the market a goldmine for this kind of disconnect. @Monolith_Cap notes Santec traded below 10 times earnings at times in 2023 and 2025, a striking gap from fundamentals. x.comÂ
