Uncovering market value in Japan: How traditional data powers factor investing

Interest in Japan factor investing has surged in 2025. This reflects structural and macroeconomic shifts such as the end of negative interest rates and a renewed government emphasis on improving capital efficiency. As inflation has returned and interest rates have begun to rise, investors are increasingly looking at value and quality equity factors. Companies with strong balance sheets and substantial cash reserves are now more valued for their resilience.

Macroeconomic shift and factor opportunity

After decades of deflation, Japan is now seeing inflation at multi-decade highs (around 3-4%), significantly above the long-standing 2% target set by authorities. The policy changes — particularly lifting negative interest rates — favour value and quality factors. This environment rewards firms that have strong fundamentals, stable earnings, good governance and capacity to return cash to shareholders.

Meanwhile, governance reforms pushed by the stock exchange are pressuring companies to improve capital returns. Many firms traded below book value in the past; now with stronger pressure for buybacks, dividends and better capital allocation, under-valued small and mid-caps may offer opportunity. Cross-shareholding practices are being unwound, and ownership disclosures are improving. These developments make the quality of governance data ever more important to factor investors.

Key Japanese datasets for fundamentals, firmographics and governance data

To design and backtest effective strategies in Japan, three types of data are essential: fundamentals data, firmographic data, and governance data. Each plays a distinct role in factor investing, especially for value, quality and earnings momentum factors.

• Japan fundamentals data: Financial statement items such as earnings, book value, cash flow, return on equity (ROE) and balance sheet metrics are central. Investors need timely, cleaned, point-in-time data and long historical series for backtesting. These data help distinguish strong from weak companies in a rising cost environment.
  
  
• Japanese firmographic data: This includes information on company size (market-cap, revenue, asset base), sectors, private vs. listed status, and ownership (including for private firms and startups). Firmographic data also tracks mergers and acquisitions, funding rounds in private firms, and other structural shifts that influence future performance. This data is critical for screening and for thematic or innovation-oriented investing.
  
  
• Japan governance data: Unique aspects of Japanese corporate governance — cross-shareholdings, board structure, shareholder ownership (foreign, domestic, stable shareholders), board independence, female directors, audit/nomination committees, disclosure practices — all give insight into how well management aligns with shareholder interests. Governance reforms in Japan are pushing for more disclosure, reduced cross-shareholdings, stronger board committees and better capital efficiency.
  
  

Why this data matters now

The current environment of policy reform and macro change makes traditional signals more powerful. Value stocks, for example, have begun to outperform expensive growth names in Japan. Earnings momentum, if not over-stretched, can add extra return when combined with sound fundamentals. Firmographic insights help avoid value traps and identify growth pockets (such as startups or innovation sectors). Governance data helps avoid companies with weak oversight or inefficient capital allocation.

Final thoughts

For investors focused on Japan factor investing, integrating high quality Japanese financial data across fundamentals, firmographic and governance dimensions is no longer optional.

Japan is in a state of transformation: inflation is back, corporate reforms are accelerating, and shareholder value is coming into sharper focus. The right datasets allow you to separate companies that will benefit from the change from those that may lag. Properly leveraging fundamentals data, firmographics and governance data can unlock strong factor premia for value, quality and earnings momentum in Japan.

Want to explore the full depth of our research into Japanese data? Book a demo with Neudata to see how our intelligence can support your data strategy.