Invesco Japan Discovery Trust
06/16/2005
 We continue to be encouraged by what we believe to be the true beginnings of an economic revival in Japan. With the signs of a turnaround in Japan gaining steam we believe Invesco Japan Discovery Trust (IJD) offers significant leverage to the recovering economy and equity markets.
Unemployment in Japan is low and after falling for three years wages are beginning to rise. We believe the strengthening job market and recovery in salary growth will help underpin consumer spending. An upturn in spending is critical as it will reduce Japan's dependency on export-led growth.
An increase in private investing would also drive a recovery. Last year, for the first time in 25 years, Japanese households took more money out of their savings accounts than they put in. We believe this is significant as it indicates the Japanese are becoming more confident in the country's recovery and the direction of asset prices. A sustained increase in private spending and investing would be a welcome shot in the arm for the economy in our opinion.
Another important source of growth is business investment. Once again the news is good as Japan reported machinery orders in April rising 2.5 percent, far exceeding expectations. The increase points to optimism as companies seek to replace old equipment that has held back productivity as priority was previously given to paying down debts. This suggests to us that Japanese companies are now more prepared to invest in future growth.
We are encouraged by the sectors favoured by the Trust's Manager. IJD's heaviest weighting is in Services at 24.0 percent followed by the Financial (16.8 percent), Retail (14.3 percent), Real Estate (14.0 percent) and Industrial (11.6 percent) sectors. We believe these industries in particular will benefit from Japan's improving economic picture.
As at June 8, IJD traded at an 11 percent discount to net asset value which was 112.5p per share. We believe the discount will narrow in the months ahead as the Trust's stock and sector selection outperform in the recovering economy. We remain confident on the medium to longer-term outlook for the Nikkei, and believe that this should also provide a positive environment for IJD.
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