Japan is the home of the world’s oldest companies and boasts one of the highest concentrations of large family-run businesses on the planet. At the start of the 21st century, one third of all Japanese listed companies had some kind of family control1 and that remains the case today.
Japan’s tendency to corporate family ownership can be explained by its relatively recent industrialisation. First, an industrial and service infrastructure of family companies sprang up alongside and became symbiotic with the state-affiliated enterprises which pushed the country into economic modernity. Second, Japan’s economic miracle of the 1970s is so recent that many founders from that era are still in charge.
Investors should pay close attention to these businesses, perhaps more than they do at present. We have observed many cases globally when family or founder-owned or run companies align well with shareholders’ interests, and in Comgest’s Japan portfolio we take that idea quite far. About one third of our holdings and, in our opinion much of the fund’s long-term outperformance, is from companies which fit that definition. Some examples are Fast Retailing, Hikari Tsushin, Nidec, Keyence, Softbank, Pan Pacific, Nihon M&A, Hoya, Obic, Zozo, Peptidream, Kobe Bussan and Sushiro.
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1From 1962-2000: source Financial Times, "How Japan’s family businesses use sons-in-law to bring in new blood", (https://on.ft.com/2Xrvftc).
This communication has not been updated since publication. The views expressed are valid at the time of publication only and may not reflect current thinking.