Shiller PE of all public Japanese companies is currently 21.21 (6/30/2019). The current CAPE ratio is significantly lower than its historical average which would indicate that the Japanese stock market is currently undervalued. However, the country’s equity market has been characterized by periods of extremely high valuations which make the average value very high. The average P/E (TTM) for Japanese companies is 18.95 and dividend yield is 2.10%. The table includes also the dividend yield and total return of the Nikkei 225 stock index.
For comprehensive data, check the Global Valuations dataset by Siblis Research.
Japanese Stock Market: P/E, CAPE Ratio & Yield
Need comprehensive data? Purchase the Global Valuations Database by Siblis Research that provides Shiller PE ratios of 22 nations for the past 20+ years (for Japan since 12/31/1982), including Dividend Yields and Total Market Cap to GNI ratios of 28 countries. Check a sample dataset from here.
Need data of the individual Japanese companies? Purchase the Global 10,000 Fundamentals dataset by Siblis Research that provides key fundamental financial data of the 10,000 largest public companies in the world. The fundamental data includes annual revenues, earnings, free cash flows, total assets, total liabilities, book values and market caps. Data is available at least for the last 10 years for all the companies, reaching back to the year 1999 for the largest companies. Check a sample dataset from here.
Historical valuation of the Japanese equities
The chart above shows the Shiller PE ratio for Japanese stock market since 1980. The graph includes also the 3-year forward return of Nikkei 225 index in order for you to examine the relationship between CAPE and stock returns (the axis for the forward return is inverted). A negative correlation between the ratio and stock market performance is visible even though the returns remained low during the last years of 1990 despite the low P/E 10.
There exists two clear spikes when CAPE has been extremely high. The first peak started to form in 1992 when the Japanese Asset Price bubble started to gain momentum. The ratio kept steadily rising until the boom reached its peak during the summer of 1990 when stocks were valued at ridiculous levels. After the stock prices crashed, CAPE quickly decreased from 90 to 35.
Between 1992-2002, Japan’s CAPE fluctuated between 25 and 40 which is still quite high compared to the stock markets of other countries. At the beginning of 2003, the ratio started its way towards another summit. Japanese stock prices started to surge and in January 2006 the country’s P/E 10 exceeded 70. The ratio dropped quickly back to 55 and very soon the global financial crisis dropped it even further to 25. During the last five years, Japan’s CAPE has stayed between 20 and 30.
About CAPE (P/E 10) ratio
Cyclically adjusted price-to-earnings was popularized by Robert Shiller who introduced the ratio to evaluate the valuation of S&P 500 index. It means the stock price divided by the ten year average earnings-per-share, both adjusted for inflation. It has been demonstrated that higher CAPE is associated with lower than average stock returns. Professor Shiller is publicly sharing his dataset for S&P 500 that is kept always up to date. Examining the Excel is the easiest way to understand how the ratio is calculated.