Charting our Focus

Driven by a Weaker Yen, We Believe Japan Is Cost Competitive Again 

With Japan’s competitiveness rejuvenated, Japanese stocks are showing new strength, presenting potential opportunities for investors. 

We think Japan’s equity market may present some of the most compelling opportunities in the world today. While its global market capitalization has shrunk, there are underappreciated attributes about its market. Not only has the Japanese stock market rebounded strongly recently, important longer-term trends are at play.

• Japan has again become ferociously competitive in a global context. In the 1970’s and 1980’s, many of the goods in US homes were made in Japan. This was partially because Japan was adept at manufacturing, but was also due to its competitive real effective exchange rate (REER), which is often used to assess export profitability.
• These conditions have returned. Today, a company that pays in yen to manufacture a product and then sells it in the US can increase profitability by a large margin, as shown in the chart.
• Japanese workers are also globally competitive; since 1991, wages in Japan have only gone up 3%¹. And wage differentials between Japan and the rest of Asia can be huge considerations in certain industries. For example, salaries of software engineers are far lower in Japan than in Hong Kong, and are competitive with those in emerging markets elsewhere in Asia.

Although the Bank of Japan may begin slowly raising rates later this year, and many expect the US Federal Reserve to cut rates in the coming months, we believe Japan’s export advantage could remain large even if the yen slightly strengthens.

Terms and Indices

Market capitalization: The value of a company that is traded on the stock market, calculated by multiplying the total number of shares by the present share price.

Real effective exchange rate (REER): The weighted average of the individual exchange rates between Japan and its 27 main trading partners. Each bilateral exchange rate is weighted according to the proportion of the country's share of trade with Japan and is adjusted for inflation.

Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of 4/30/2024.

A Word About Risk: Pioneer Multi-Asset Income Fund

The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment. All investments are subject to risk, including the possible loss of principal. Pioneer Multi-Asset Income (“MAI”) Fund has the ability to invest in a wide variety of securities and asset classes. Equity-linked notes (ELNs) may not perform as expected and could cause the fund to realize significant losses including its entire principal investment. Other risks include the risk of counterparty default, liquidity risk and imperfect correlation between ELNs and the underlying securities. High yield bonds possess greater price volatility, illiquidity, and possibility of default. Investments in fixed income securities involve interest rate, credit, inflation, and reinvestment risks. As interest rates rise, the value of fixed income securities falls. Prepayment risk is the chance that an issuer may exercise its right to prepay its security, if falling interest rates prompt the issuer to do so. Forced to reinvest the unanticipated proceeds at lower interest rates, the Fund would experience a decline in income and lose the opportunity for additional price appreciation. The Fund may invest in mortgage-backed securities, which during times of fluctuating interest rates may increase or decrease more than other fixed-income securities. Mortgage-backed securities are also subject to pre-payments. The Fund may invest in subordinated securities which may be disproportionately adversely affected by a default or even a perceived decline in creditworthiness of the issuer. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. The Fund may invest in inflation-linked securities. As inflationary expectations increase, inflation-linked securities may become more attractive, because they protect future interest payments against inflation. Conversely, as inflationary concerns decrease, inflation-linked securities will become less attractive and less valuable. The Fund may invest in insurance-linked securities (ILS). The Fund could lose a portion or all of the principal it has invested in an ILS, and the right to additional interest and/or dividend payments with respect to the security, upon the occurrence of a trigger event that leads to physical or economic loss. ILS may expose the Fund to issuer (credit) default, liquidity, and other risks. The Fund may invest in floating rate loans. The value of collateral, if any, securing a floating rate loan can decline or may be insufficient to meet the issuer’s obligations or may be difficult to liquidate. The Fund may invest in underlying funds, including ETFs. In addition to the Fund’s operating expenses, investors will indirectly bear the operating expenses of investments in any underlying funds. Investments in equity securities are subject to price fluctuation. Small-and mid-cap stocks involve greater risks and volatility than large-cap stocks. The Fund may invest in Master Limited Partnerships, which are subject to increased risks of liquidity, price valuation, control, voting rights and taxation.  The Fund may invest in zero coupon bonds and payment in kind securities, which may be more speculative and fluctuate more in value than other fixed income securities. The accrual of income from these securities are payable as taxable annual dividends to shareholders. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on performance. The Fund may invest in credit default swaps, a type of derivative, which may in some cases be illiquid, and increases credit risk since the Fund has exposure to both the issuer of the referenced obligation and the counterparty to the credit default swap. The Fund and some of the underlying funds employ leverage, which increases the volatility of investment returns and subjects the Fund to magnified losses if an underlying Fund’s investments decline in value. There is no assurance that these and other strategies used by the Fund or underlying funds will be successful. Please see the prospectus for a more complete discussion of the Fund’s risks.

A Word About Risk: Pioneer International Equity Fund

The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment. Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. To the extent the Fund invests in issuers located within specific countries or regions, the Fund may be particularly affected by adverse markets, rates, and events, which may occur in those countries and regions. The Fund is subject to currency risk, meaning that the Fund could experience losses based on changes in the exchange rate between non-US currencies and the US dollar. The market price of securities may fluctuate when interest rates change. When interest rates rise, the prices of fixed income securities in the Fund will generally fall. Conversely, when interest rates fall, the prices of fixed income securities in the Fund will generally rise.

Individuals are encouraged to seek advice from their financial, legal, tax and other appropriate professionals before making any investment or financial decisions or purchasing any financial, securities or investment-related product or service, including any product or service described in these materials. Amundi US does not provide investment advice or investment recommendations.

Before investing, consider the product's investment objectives, risks, charges and expenses. Contact your financial professional or Amundi US for a prospectus or summary prospectus containing this information. Read it carefully. To obtain a free prospectus or summary prospectus and for information on any Pioneer fund, please download it from our  literature section.

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