Japan is a staple country on investor’s radar, and the related exchange traded fund (ETF) makes the access to Japan hard to ignore. So, are there reasons to add Japan to your portfolio?

Jeff Saut for Minyanville has a case that supports the argument that Japan’s descent may be ending and an upward movement may soon emerge. Although Japan’s demographics and corporate governance aren’t the greatest, a quick rundown of corporate Japan show sings that restructure has already started, especially in the small-cap realm.

Here are four signs:

1. A bull market begins with cheap valuations. Japan’s P/E multiple is high — but in that, it’s like a cyclical stock you’d want to buy when its P/E multiple is high and the price-to-book is low. For the record, we watch trend lines to spot potential opportunities.

2. Foreign investors and commercial banks should provide the liquidity that is needed for Japan to recover. Japan’s money multiplier is positive for the first time in two decades.

3. Peaceful relations between China and Taiwan means greater integration between China and Japan. Japan also does more business with China than it does with the United States. China’s transformation could mean good things for Japan.

4. Japanese equities will prosper if the Democratic Party of Japan (DJP) is gaining traction over the long-dominant Liberal Democratic Party. The signs are there that this is happening.

  • iShares MSCI Japan Index (EWJ): down 1.6% year-to-date

For more stories on Japan, visit our Japan category.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.