The Point for Japan

Research evidence excerpt

The Point for Japan

Alps Alpine (6770.T) - Fair Trade Commission issues corrective recommendation

for violation of Japan's Subcontract Act

On June 16, Alps Alpine announced that it received a corrective recommendation

from the Fair Trade Commission for violating Japan's Subcontract Act. The

commission apparently determined that Alps Alpine placed orders with three

manufacturing subcontractors at unfairly low prices in the period starting from

October 1, 2024. The company intends to renegotiate the unit prices of the 16

product numbers involved and, if agreement is reached, to retroactively pay any

difference. Since this involves manufacturing subcontracting, we assume the

Mobility segment is affected. As the violation is limited to 16 product numbers, the

earnings impact appears minimal as the company stated, but the news leaves a

negative impression.

Takayuki Naito

Industry

Japan Real Estate and REITs - Investment strategy in light of BoJ meeting

On June 16, the BoJ decided to hike its policy rate by 25bps and to cease its

reduction of JGB purchases from April 2027. While the decisions were in line with

expectations, real estate and J-REIT sector share prices reacted somewhat

negatively. Although rate hikes are generally negative for the sector as they

increase interest payments and push up cap rates, real estate fundamentals

remain favorable, particularly for offices, and we believe profit growth can be

sustained. We expect a further improvement in the business environment, in the

form of accelerating office rent hikes, to act as a catalyst. We prefer developers

over J-REITs.

Masashi Miki, CFA

Japan Pharmaceuticals and MedTech - North American investor feedback -

Otsuka, Santen, Asahi Intecc popular

We visited North American investors on June 2-9.