JPMorgan Japanese Investment Trust Outperforms with 25% NAV Growth in FY2025

JFJ’s FY2025: 25% NAV Total Return and Clear Outperformance

JPMorgan Japanese Investment Trust (JFJ) has delivered a punchy year. For the 12 months to 30 September 2025, the trust’s net asset value (NAV) total return was +25.0% (measured with debt at fair value), comfortably ahead of its benchmark at +16.9%. The share price total return landed at +24.9%.

That result builds on a strong medium-term record. The three-year annualised NAV total return is +18.8% versus +13.9% for the benchmark. Five years still lag due to the 2021-22 rate shock, but over ten years the annualised NAV total return of +11.4% beats the benchmark’s +9.5%.

What drove the beat: stock selection, gearing and timely themes

The managers leaned into companies embracing Japan’s ongoing corporate reforms, and added exposure to emerging growth areas like defence. Stock-picking did the heavy lifting, with gearing and buybacks adding a useful tailwind. Notably, this came despite Value stocks outperforming the Quality/Growth tilt that JFJ typically favours – a style headwind that makes the outperformance more impressive.

Attribution highlights

• Benchmark return: +16.9%
• Stock selection: +5.3%
• Gearing/cash: +2.6%
• Currency: +0.1%
• Management fee/expenses: -0.5%
• Share buybacks: +0.4%

Key numbers investors should know

NAV total return (debt at fair value)	+25.0%
Benchmark total return	+16.9%
Share price total return	+24.9%
3-year annualised NAV total return	+18.8% (benchmark +13.9%)
10-year annualised NAV total return	+11.4% (benchmark +9.5%)
Net assets	£1,220,124,000
NAV per share	757.9p (debt at par) / 766.2p (debt at fair value)
Gearing at year end	13.5% of net assets (14.2% at report date)
Proposed final dividend	8.70p (2024: 6.75p)
Buybacks in year	5,538,996 shares; £33.156 million; c.11.3% average discount

Gearing and CFDs: why it mattered this year

Gearing – borrowing to invest – can magnify returns. JFJ ran between 6.1% and 16.6% during the year, averaging 13.1%, and ended at 13.5%. The board funds this through low-cost long-term debt (average coupon 1.1%) and Contracts for Difference (CFDs), which are derivatives that provide leveraged exposure without owning the shares. CFDs have been used since 2024 and helped deliver flexibility and cost efficiency.

Opinion: in an up market, this is a positive. It cuts both ways in drawdowns, so the board’s 5% net cash to 20% geared range feels sensible. The revolving JPY 10 billion facility was closed as not required – another sign the funding mix is fit for purpose.

Discount control: buybacks doing their job

JFJ kept its discount competitive and less volatile by buying back 5,538,996 shares into Treasury at an average 11.3% discount to NAV, costing £33.156 million. That’s immediately accretive to NAV per share for remaining holders. At year end, 23,634,985 shares were held in Treasury (12.8% of total), with 160,978,203 ordinary shares in issue excluding Treasury. A further 1,650,000 shares were bought back after the year end.

Opinion: a disciplined buyback programme is exactly what you want in an investment trust trading at a discount. The board intends to keep the policy.

Dividend up 29%: 8.70p proposed

Revenue climbed as Japanese corporates upped payout ratios. The board proposes a final dividend of 8.70p per share (2024: 6.75p), payable 12 February 2026 to holders on 30 December 2025 (ex-dividend 29 December 2025). The trust pays out the majority of annual revenue as a single final dividend, but it remains a capital growth mandate – not an income targeter.

Opinion: rising distributions in Japan are a tailwind, but the board rightly flags income isn’t guaranteed. Treat the 8.70p as a by-product of the strategy, not its goal.

Portfolio moves: defence added, quality bias retained

Top contributors included Advantest (AI chip testing), IHI (aero engineering, benefitting from restructuring and rising defence spend), Mitsui E&S (ship engines and port cranes), and Rakuten Bank (Japan’s largest online bank). Detractors were Keyence, Japan Exchange, and Tokyo Electron, with the latter exited.

Notable changes

• New buys: IHI, NEC (defence/digital), Mitsui E&S, Mitsubishi UFJ Financial Group, Ryohin Keikaku (Muji), Taisei, Modec, SBI Holdings; added to Sony.
• Sales/trims: Tokyo Electron, Shin-Etsu Chemical, Denso, Murata; trimmed Hitachi after strong gains.

Portfolio characteristics

• Forward P/E: 19x vs index 15x
• Return on equity: 12.1% vs 8.7%
• Operating margin: 18.3% vs 14.0%
• Active share: 87.0%
• Turnover (annualised): 42.6%

Opinion: the portfolio’s quality tilt is clear in higher ROE and margins, and it carries a valuation premium. If Value keeps leading, that’s a style headwind – yet FY2025 shows stock selection can overcome it.

Scale-up completed: JSGI combination lifts assets and cuts fees

The 2024 combination with JPMorgan Small Cap Growth & Income Trust (JSGI) enlarged JFJ to roughly £1.2 billion of net assets, improved liquidity, and made the fee structure more competitive. It also added Tokyo-based co-manager Xuming Tao alongside Nicholas Weindling and Miyako Urabe. Bigger, cheaper, and deeper bench strength – all positives for retail holders.

Governance, AGM and board succession

Takashi Maruyama, former CIO of Asset Management One, joined as a non-executive director from 1 October 2025. Chair Stephen Cohen will step down after the January 2027 AGM, with Audit & Risk Chair Sally Duckworth lined up to succeed him. The board plans to move from six directors back to five over time.

The AGM is set for Thursday, 22 January 2026 at 12.30 p.m., with in-person and online attendance options.

Outlook: reforms, AI and reshoring still in JFJ’s favour

Corporate reform in Japan continues to gather momentum – higher dividends, buybacks, fewer cross-holdings and a more activist culture. Add in structural trends like AI, automation, defence modernisation and supply-chain reshoring, and you have a fertile hunting ground for JFJ’s kind of companies. Wage growth is now outpacing inflation, and NISA reforms could push more domestic cash into equities.

Risks? Persistent yen weakness, evolving US trade policy, and the Bank of Japan’s policy normalisation path. The portfolio’s premium valuation versus the index is another watch point. But with strong balance sheets across corporate Japan and a capable on-the-ground team, JFJ looks well positioned.

Why this update matters for investors

• Clear alpha: +8.1 percentage points over the benchmark in FY2025.
• Shareholder-friendly: active buybacks and a bigger dividend.
• Right themes: defence, AI, and governance-led restructurings.
• Sensible risk: gearing inside clear limits, diversified funding via low-cost debt and CFDs.

What to watch next

• Discount behaviour versus peers and ongoing buyback pace.
• Dividend sustainability alongside Japan’s payout trend.
• Style dynamics: if Value roars back, can stock-picking keep trumping it?
• Impact from new positions (IHI, NEC, MUFG, Mitsui E&S) and exits (Tokyo Electron, Shin-Etsu).
• Gearing level as markets evolve into 2026.

Bottom line: JFJ has put up a strong year with sensible capital allocation and a clear strategy aligned to Japan’s structural change. For investors who want quality-leaning exposure to Japan with active discount control, this set of results is encouraging.