Reform is the backdrop, but this isn’t about just owning the index. Japan has around four thousand listed companies and plenty of them are cheap for a reason. Our job is to find the ones with tailwinds strong enough to matter.
Three stand out. Labour shortages, legacy IT systems, and a culture finally willing to change. That combination is creating opportunities in areas that have been stagnant for decades.
The Digital Cliff
Japan still spends around 90% of its IT budget patching up old systems. More than 60% of corporate IT platforms are over twenty years old. Policymakers call it the ‘2025 digital cliff.’ These systems are past their use-by date. At some point they will break, and replacement is inevitable.
At the same time, there aren’t enough workers to go around. The population is shrinking, the workforce is shrinking faster, and wage growth is the highest it has been in decades. If you’re running a business, that means you have to do more with less. Productivity tools are no longer a nice-to-have. That urgency is fuelling demand for software and platforms.
Back-office accounting software hardly sounds exciting. But OBIC Business Consultants (JP:4733) has turned it into one of the better businesses in Japan. Its Bugyo suite handles accounting, payroll, tax and HR for hundreds of thousands of small and medium-sized enterprises. Once embedded, clients rarely leave, delivering margins that most global software firms would envy. The company has been migrating its loyal customer base from on-premise systems to the cloud over the past few years. That allows for upselling of new services and deepens its moat. Japan’s digital cliff is OBIC Business Consultant’s opportunity.
Solutions for Large Corporates
At the other end of the spectrum are Japan’s large corporates, very slow to change and still reliant on systems written decades ago. This is where micro-cap company DreamArts (TSE:4811) comes in. Its SmartDB no-code platform allows frontline staff to build the tools they need without waiting on IT teams. Other products target communication and workflow bottlenecks across banks, manufacturers, and government agencies. These projects can require decade long commitments due to complexity. The cost of inefficiency in these organisations is enormous, and DreamArts offers a rare path to improvement.
Recruitment in Japan is Changing
Labour shortages and rising wages are also reshaping the recruitment industry. Visional (TSE:4194), through its BizReach platform, has become the dominant channel for professional, mid-career hiring. The platform has a leading market share in Japan, with a user base of over 2.5 million high-income white-collar job seekers. Growth has been consistent, margins strong, and management disciplined in reinvestment. For a business compounding earnings at around 20%, the valuation looks undemanding.
The cultural backdrop in the labour market matters. Lifetime employment is becoming less entrenched. One in three graduates now expects to switch jobs throughout their career. Prospective job changers have been on the rise since Covid and exceeded 10 million individuals for the first time in 2023. The era of major job transitions has begun. Employers and recruiters desperate for talent are paying to access Visional’s growing pool of eligible candidates. And every new participant makes the platform more valuable for the next one. It’s a network effect.
Digitisation in Health
Healthcare is another sector ripe for digitalisation. Japan’s home nursing market is expanding rapidly as the population ages and hospitals push patients into home-care. Yet most of the country’s 17,000 nursing stations still run on paper or Excel. Nurses spend up to a third of their time on administration, worsening an already severe labour shortage.
This is where eWeLL (TSE:5038) has carved out a niche. Its iBow platform is Japan’s leading cloud product built specifically for home-visit nursing, covering everything from medical records and care planning to scheduling, billing, and compliance. The business model is simple and aligned: stations pay a base subscription plus a small per-visit fee. More patient visits mean more revenue for both sides. The product is sticky. Churn is close to zero. Today iBow supports more than 3,000 nursing stations and 740,000 patients, giving eWeLL a scale advantage and a dataset that rivals can’t match. Penetration is still only about 18%, leaving a long runway as the market continues to grow.
What Forager Owns
The Fund owns seven Japanese software companies, each serving a different end market but all benefiting from reform, an ageing workforce, and the urgent need to digitise. They are not just cheap stocks. They are growth businesses backed by long-term structural tailwinds.
For Forager, that is the attraction. Japan offers the combination we look for: undervalued markets, visible change, and companies we can meet, question, and back for the long haul.
That is why almost one-fifth of the Forager International Fund is invested in Japan.
If you are interesting in getting some exposure to Japan, you can apply for the Forager International Shares Fund here.